FDI with any type of Chinese investment will need the approval of the government

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FDI with any type of Chinese investment will need the approval of the government

Union Government makes a change of plan

Tuesday, 20th October 2020

The Centre seems to drop its previously chalked out strategy for setting a floor for the “significant beneficial ownership” and as per the change of strategy foreign direct investment (FDI) proposals that come with even the tiniest Chinese holding will have to have an approval from the government.


In the month of April, at the time of approval of the plan for the screening of Foreign Direct Investment proposals from neighboring countries falling in vicinity to the border, the government had put across two options- one, setting the threshold at 10% (as per the provision included in the Companies Act) or at 25% (as per the prescription included in the Prevention of Money Laundering Act).


 However after six months, post several rounds of meetings and discussions, the outlook seems to have undergone a change. “The (Cabinet) decision did not mention a minimum or maximum limit. So, even it is a small fraction, it will be covered,” said a government official to the TOI.


Threshold for the “significant beneficial ownership” was directed towards ensuring that the China-owned companies weren’t entering India through any third country like Mauritius or Singapore.


This change of plan on the part of the government is being monitored closely by the various start-ups like BigBasket, Zomato, Paytm that come with Chinese investment. Many other proposals too are waiting for government approval.


Sources revealed that a meeting was held this week between several ministerial groups and the guidelines to be followed by the various ministries of the country ranging from telecom to industry to power to the commerce were discussed and framed

 “These will be guidelines to guide ministries on proposals, they will not be binding,” said an official in this context.


Officials further informed that they are in the process of finalizing the guidelines in a couple of days, of which the FDI flow chains from Hong Kong would be a part. However, the Taiwanese investments, they said, are likely to be kept out of the need for mandatory clearance.



Source: Times of India 

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