India re-allowing Chinese cos in electronics manufacturing as industry pressure grows

An inter-ministerial panel in India has approved five to six investment proposals in the electronics manufacturing sector, including some from Chinese companies and others with connections to China.

This development is particularly notable as these approvals mark some of the first in recent times involving Chinese entities, given the heightened border tensions and increased scrutiny on investments from China in India, according to a report by Economic Times.

Among the prominent companies to receive approval is Chinese electronics giant Luxshare, a major supplier to Apple. Additionally, a joint venture between Bhagwati Products (Micromax) and Huaqin Technology has been cleared, with the Chinese firm taking a minority stake in the venture. Other approved proposals include Taiwan-based firms that are listed in Hong Kong or have investments originating there.

“Some of these are Taiwanese companies with beneficial owners who have interests in Hong Kong or are listed on the Hong Kong exchange, while a few are genuine Chinese firms,” said an official, speaking on condition of anonymity.

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The clearances come amid growing pressure from India’s electronics manufacturing industry, which has been pushing for the approval of investments linked to China to help expand and deepen the country’s supply chains.

So far, two rounds of meetings have been held by the inter-ministerial panel, resulting in the approval of seven to eight proposals across various sectors, with the majority in electronics.

Indian companies have been lobbying for a re-evaluation of trade ties with China, particularly regarding Press Note 3. In 2020, the Department for Promotion of Industry and Internal Trade (DPIIT) amended the foreign direct investment (FDI) policy, requiring prior government approval for investments from countries sharing a land border with India. This move followed the India-China border clashes in mid-2020.

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However, the government now appears to be cautiously reopening to Chinese investments, with safeguards in place. The shift is driven by the belief that increasing local value addition is crucial for India to achieve self-sufficiency in electronics manufacturing.