India stymies investment from Hong Kong as border row with China drags on

Amid a border stand off with China, the Indian government had tightened rules for foreign direct investment from all nations sharing a land border

India is subjecting foreign investment proposals from Hong Kong at par with China as part of a new policy that makes approval mandatory for plans from countries that share a land border, a person with the knowledge of the matter said.
 

Nearly 140 investment proposals valued at over $1.75 billion, mostly from China and Hong Kong -- China’s special administrative region -- have been put on hold pending scrutiny, the person said asking not to be identified citing rules on speaking to the media.

Amid a border stand off with China, the Indian government tightened rules for foreign direct investment from all nations sharing a land border, making scrutiny mandatory for such investments -- a restriction that was earlier applicable only to Pakistan and Bangladesh.

The delays may complicate deal-making and impact the flow of capital from private equity firms and hedge funds, which often include investors domiciled in China or Hong Kong. This may starve Indian companies of investment in the midst of the pandemic-induced economic contraction.

The curbs also apply when the beneficial owner of the proposed investment is situated in any of India’s neighbors. A government panel constituted to approve these proposals is yet to decide on the rules including on beneficial ownership.

The trade and industry ministry spokesman didn’t immediately answer a call made to his mobile phone.

READ MORE: China Gained Ground on India During Bloody Summer in Himalayas

Tensions between the two giant Asian economies have been escalating since May. Twenty Indian soldiers and an unknown number of Chinese troops were killed in clashes along the Himalayan frontier earlier this year.

The military crisis is the worst since the two sides fought a war in 1962. India responded by banning Chinese apps, tightening visa rules for Chinese nationals and imposing curbs on companies from nations sharing a land border from bidding for government contracts.

Earlier last month, Foreign Minister Subrahmanyam Jaishankar had told Bloomberg News that trade with China can’t carry on in business-as-usual mode as long as there are unresolved issues along the border -- a disputed 3,488-kilometer (2,167-mile) stretch known as the Line of Actual Control.