India has begun easing some investment restrictions on Chinese firms, signalling a tentative shift towards economic engagement despite ongoing political tensions, according to recent policy adjustments and commentary.
India’s economic relationship with China is showing tentative signs of thaw, even as suspicion on both sides remains deeply rooted. Recent commentary in Chinese media has treated a string of Indian policy shifts as evidence that New Delhi is softening its position on Chinese capital, trade and manufacturing links after years of tighter scrutiny. That interpretation is not universally shared, but the underlying trend is clear enough: India has begun loosening some restrictions it imposed in 2020, when it moved to block opportunistic takeovers and sharply increased oversight of investment from land-border countries.
The most significant change came with India’s updated foreign direct investment policy, which now allows overseas investors with up to 10% exposure from land-border countries to use the automatic route in some cases, while keeping sensitive sectors and entities with control issues under government review. The Department for Promotion of Industry and Internal Trade also notified changes this year that effectively relax parts of the Press Note 3 framework introduced during the pandemic. Chinese and Indian coverage alike has framed the move as a selective reopening, not a wholesale embrace, but it is still a notable departure from the blanket suspicion that followed the 2020 border crisis.
Chinese commentary has also seized on the fact that India has cleared some firms with Chinese ownership or links to bid for power and energy projects, while the government has set a 60-day timetable for some proposals from land-border countries, including projects involving advanced battery components and rare earth permanent magnets. That has fed a narrative in Chinese outlets that India is becoming more pragmatic, if only because its industrial ambitions still depend on outside capital and supply chains. Indian business reporting, however, has presented the same shifts as part of a broader effort to build local capacity and attract investment without surrendering strategic control.
The pull towards caution remains visible. India still excludes entities incorporated in China, Hong Kong and other land-border countries from the broadest form of automatic access, and continued scrutiny reflects unresolved political and security tensions. Yet the scale of the change should not be dismissed. Even limited openings matter in sectors such as manufacturing, components and intermediate goods, where Chinese expertise and equipment remain hard to replace quickly. That is why some Chinese analysts see the policy shift as more than a technical adjustment: they read it as a signal that India is trying to separate economic engagement from strategic rivalry, even if only partially and conditionally.
In that sense, the debate over Chinese investment in India has moved beyond simple slogans about de-risking or self-reliance. It now sits at the intersection of industrial policy, border politics and global supply chains, with each side looking for leverage as well as opportunity. India wants foreign capital and manufacturing depth; China’s commentators, meanwhile, are watching for signs that New Delhi’s barriers are beginning to crack. The result is a relationship that remains wary, but no longer entirely closed.
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