Could India’s Revised FDI Framework Encourage More China-Linked Investment?

DPIIT foreign investment data, published on July 27, 2026, shows that China and Hong Kong continued to play distinct roles in India’s FDI landscape in 2025. While Chinese FDI remained limited, Hong Kong retained its position as a larger source of capital and government-approved investment proposals.

India’s latest foreign direct investment (FDI) statistics, released by the Department for Promotion of Industry and Internal Trade (DPIIT) on July 27, 2026, show that investment inflows from China and Hong Kong remained relatively modest but slightly higher in 2025. The figures come after India’s March 2026 revision of Press Note 3 (2020), which recalibrated the investment screening framework for land-border country investments while maintaining national security oversight.

Although the latest data does not indicate a sharp increase in direct Chinese investment, the revised policy is expected to improve regulatory certainty and support future investment activity, particularly through global funds and non-controlling investors.

China’s FDI inflows into India in 2025

According to DPIIT, China accounted for cumulative FDI equity inflows of US$2.51 billion into India between April 1, 2000, and December 31, 2025. While Chinese investment increased slightly in 2025, annual inflows remain well below historical levels, reflecting the continued moderation in direct investment activity over recent years.

Source: Country-wise FDI data statement, DPIIT.

Overall, China ranks as India’s 23rd largest FDI source for the period between April 1, 2000, and December 31, 2025.

Hong Kong outpaces China in FDI into India

Compared to mainland China, Hong Kong has consistently played a more significant role in India’s foreign investment landscape. Between April 2000 and December 2025, cumulative FDI equity inflows from Hong Kong reached US$4.90 billion, almost double the amount originating from mainland China.

Source: Country-wise FDI data statement, DPIIT

Hong Kong ranks as India’s 15th largest FDI partner over the April 2000-December 2025 period.

The contrast between China’s and Hong Kong’s investment figures underscores Hong Kong’s continued importance as a regional investment and financial hub for businesses investing into India.

PN-3 revision reshapes land-border investment scope

The differing investment trends between mainland China and Hong Kong should also be viewed in the context of India’s revised Press Note 3 (PN3) framework governing investments from countries sharing a land border with India.

Originally introduced in April 2020, Press Note 3 required prior Indian government approval for all foreign investments originating from countries sharing a land border with India, including China, or where the beneficial owner was situated in such countries. The policy slowed investment approvals and affected not only direct Chinese investors but also multinational corporations and global investment funds with minority Chinese shareholding.

In March 2026, India revised the framework by introducing a clearer 10 percent beneficial ownership threshold aligned with the Prevention of Money Laundering Act (PMLA). Under the revised policy, overseas investors with up to 10 percent non-controlling ownership from land-border countries may invest in India through the automatic route, subject to sector-specific regulations and other applicable conditions. The central government also committed to a 60-day approval timeline for proposals requiring government clearance in selected manufacturing sectors, including electronics components, capital goods, and solar manufacturing.

CLICK HERE: India’s FDI Policy for Border-Country (LBC) Investors: Implications for China-Linked Capital

Hong Kong leads government-approved FDI proposals in India

Approved FDI proposals for FY2025-26 (April 2025 to March 2026) provide additional insight into how India’s revised investment screening framework is being implemented for China and Hong Kong-linked investments.

During FY 2025-26, Hong Kong secured 13 approved FDI proposals worth INR 6.104 billion, making it the largest source of government-approved investment proposals by number of approvals. By comparison, China received only one approved proposal valued at INR 10 million.

Hong Kong’s lead becomes even more significant when compared with other major investment sources. It recorded the highest number of approved proposals during FY2025-26, ahead of Singapore (5), the United Kingdom (5), the United States (5), Japan (4), and Switzerland (4).

The approval data suggests that Hong Kong-based investors remain considerably more active than mainland Chinese investors in seeking government clearance for investments into India.

Viewed alongside the revised Press Note 3 framework, the approval data indicates that India is adopting a more calibrated approach toward China-linked investments by facilitating eligible investments while maintaining oversight of transactions involving higher ownership thresholds, control, or sensitive sectors.

China’s company-level FDIs into India

Company-level FDI data provides additional insight into how China-linked capital has been deployed across sectors in India. The largest recorded investments have primarily supported manufacturing, industrial production, renewable energy, and financial services.

Source: FDI Synopsis on Great Mekong Countries, DPIIT

Outlook

The latest DPIIT data suggests that direct investment from mainland China into India remains relatively limited despite a modest recovery in 2025, while Hong Kong continues to play a more prominent role as both a source of FDI inflows and government-approved investment proposals.

Taken together, the investment data and the revised Press Note 3 framework indicate that India is seeking to balance investment facilitation with national security considerations. By providing greater regulatory clarity for eligible investors while retaining oversight of higher-risk transactions, the government has created a more predictable investment environment. Whether these policy changes translate into higher FDI inflows from China- and Hong Kong-linked investors will depend on the pace at which approved projects are implemented and broader investor confidence continues to improve.

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