India's Business Ties with China Face Scrutiny Amid Pakistan Diplomacy

New Delhi, May 15 (Alayaran.com) - Indian businesses planning collaborations with Chinese firms are now facing a heightened atmosphere of caution, as regulatory hurdles are expected to intensify in the wake of China's public support for Pakistan amid renewed hostilities.

According to an Economic Times report published on Wednesday, the geopolitical shift has cast a shadow over a number of business proposals, notably Haier’s intended stake sale in its Indian subsidiary. The firm had planned to offer 25–51 percent of its Indian business, valued at $2 billion to $2.3 billion, and was being examined by top contenders including Reliance Industries and a consortium led by Bharti Group's Sunil Mittal and private equity giant Warburg Pincus.

The decision to proceed with the stake sale has been put on hold until further notice due to concerns from the companies involved about regulatory clearances. An executive at Haier India stated that the plans will progress only after careful evaluation of the developing regulatory climate surrounding Chinese deals.

This is not the first instance of regulatory scrutiny targeting Indian business ties with China. Since 2020, when tensions increased following the border conflict, Press Note 3 has mandated layered government clearances for investments from countries sharing a land border with India. Only a few large Chinese firms have been able to secure approval under this regulation.

Citing sources, the Economic Times report revealed that entities participating in PLI-linked joint ventures may only be allowed minority ownership, which would be permissible only when critical components cannot be sourced elsewhere.

This has dealt a significant blow to planned collaborations between Indian businesses and their Chinese counterparts, adding to concerns about investment security in India. The situation highlights the increasing complexity of India's relationship with China and its impact on the business world.