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Under govt scrutiny: Chinese investment pacts, private joint ventures

Chinese trade and investment in India could come under pressure as the government plans to examine old and new private sector joint ventures and investment agreements to monitor alleged violation of tax and other laws, sources said The Indian Express reported.Chinese trade and investment in India could come under pressure as the government plans to examine old and new private sector joint ventures and investment agreements to monitor alleged violation of tax and other laws, sources said The Indian Express reported.


Chinese trade and investment in India could come under pressure as the government plans to examine old and new private sector joint ventures and investment agreements to monitor alleged violation of tax and other laws, sources said The Indian Express reported.

The government has been cautious on Chinese investments in Indian companies as well as their participation in tenders for public procurement.

The priority, the sources said, will be vetting documents and agreements of companies in the information technology and finance sector. The scope of the probe will, however, be expanded in time to cover other strategic and non-strategic sectors.

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“With the emphasis on Atmanirbhar Bharat, there is greater scrutiny of investments from some of our neighbouring countries. As we have already enunciated, any opportunistic takeover in the financial sector cannot be allowed and the investors should not hesitate in subjecting themselves to scrutiny under the rules and regulations,” a senior government official said.

In the information technology space, the call to bring under scrutiny companies with Chinese investments arose after intelligence reports suggested that some of these firms may be violating tax laws as well as local data storage norms, another official said.

“There is no harm in going over these agreements with a fine comb once again just to ensure there have been no violations. If any discrepancies are found, we will take a call on the future course of action,” the official said.

In April, the government amended the foreign direct investment rules mandating prior approval for investment by entities in countries that share land borders with India.

“An entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route,” the Department for Promotion of Industry and Internal Trade (DPIIT) had then said.

The move came days after China’s central bank, People’s Bank of China, raised its shareholding in HDFC to over one per cent.

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The government said that prior approval was compulsory for foreign investments from all countries sharing borders with India to prevent “opportunistic takeovers” of domestic firms following the pandemic.

Later in July, the government amended the General Financial Rules, 2017 as well, and imposed restrictions on public procurement from bidders of countries which share a land border with India.

Citing national security and defence, the amended rules said that bidders from countries which share a land border with India will be eligible to participate in Indian bids only if they are registered with the registration committee constituted by the DPIIT.

The companies from these countries are now also required to take mandatory political and security clearance from the Ministry of External Affairs and Ministry of Home Affairs.

The latest move to scrutinise old and new agreement papers is the economic fallout of a tense border standoff between India and China in Ladakh.

On June 17, two days after 20 Indian Army personnel were killed in clashes with Chinese troops in Galwan Valley, the Department of Telecommunications barred state-run BSNL and MTNL from using Chinese equipment for the 4G network projects.

The tender was formally cancelled later. A revised tender which specifically bars Chinese companies from participating in the tender has not been issued yet. Other than that, Chinese companies have also been barred from participating in any highway tenders, and their investment in micro, small and medium enterprises have been banned.

In June, the government, citing the “emergent nature of threats”, banned 59 Chinese mobile applications. In September, another 118 apps and games, which included the popular game PUBG, were banned in India.

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