New portfolio investors from Hong Kong, China to be scrutinised: Sources

The discussions come weeks after India said it will screen all foreign direct investment (FDI) from countries with which it shares a land border, a move it said was aimed at staving off takeovers when asset prices are depressed during the coronavirus pandemic. The Chinese government described the policy as discriminatory.

FDIs are longer-term direct investments that typically provide control over a firm’s management. But concerns had risen in the Centre the policy change could prompt Chinese investors to ramp up their investment in India as portfolio investors, purchasing company securities such as equities to gain control, officials said.

Two sources said a body would be set up to scrutinise new FPI registrants from countries such as China, and the rules will also apply to Hong Kong, a special administrative region from where substantial Chinese investments are routed.