India’s Revised FDI Rules Bring Clarity as Hong Kong Stays Ahead of China in Investment Flows

• Mainland China’s cumulative FDI into India remains modest at $2.51 billion, while Hong Kong leads with $4.90 billion.

• Revised Press Note 3 rules introduce a 10% beneficial ownership threshold and clearer approval norms.

• Hong Kong secured 13 approved FDI proposals worth about $64.25 million in FY2025-26.

• India is balancing foreign investment facilitation with national security oversight.

India’s latest foreign direct investment data points to a cautious but evolving investment relationship with China and Hong Kong, as New Delhi seeks to attract capital while preserving oversight of sensitive cross-border transactions.

Figures released by the Department for Promotion of Industry and Internal Trade on July 27, 2026, show that investment inflows from mainland China and Hong Kong remained comparatively modest in 2025, though they recorded a slight improvement from recent subdued levels. The data follows India’s March 2026 revision of Press Note 3 of 2020, a policy framework that governs investments from countries sharing a land border with India.

The revised rules have not yet produced a significant surge in direct Chinese investment. However, they are expected to provide greater regulatory predictability, particularly for global investment funds, multinational corporations, and non-controlling investors with limited ownership links to land-border countries.

According to DPIIT, cumulative FDI equity inflows from mainland China into India stood at $2.51 billion between April 1, 2000, and December 31, 2025. Although inflows from China edged up in 2025, they remained far below earlier peaks, indicating that direct investment activity from mainland Chinese entities continues to be restrained.

Hong Kong, by contrast, has remained a more prominent contributor to India’s foreign investment landscape. DPIIT data show that cumulative FDI equity inflows from Hong Kong reached $4.90 billion between April 2000 and December 2025, nearly twice the total recorded from mainland China.

The gap between the two figures highlights Hong Kong’s continued role as a regional financial and investment gateway for companies directing capital into India. Its position as a global business hub appears to have helped sustain a higher level of India-bound investment compared with direct flows from mainland China.

The differing investment patterns also need to be understood against the backdrop of India’s revised Press Note 3 framework. Initially introduced in April 2020, the policy required prior government approval for all foreign investments from countries that share a land border with India. It also applied to cases where the beneficial owner of the investing entity was based in such a country.

The original framework had a broad impact. It slowed the approval process for some transactions and affected not only direct Chinese investors but also global companies and investment funds with even minority Chinese participation in their ownership structures.

In March 2026, India modified the rules by introducing a clearer 10% beneficial ownership threshold, aligned with the Prevention of Money Laundering Act. Under the updated framework, overseas investors with up to 10% non-controlling ownership from land-border countries can invest in India through the automatic route, provided they comply with sector-specific caps, security requirements, and other applicable regulations.

The government has also indicated a 60-day approval timeline for certain proposals that still require official clearance in selected manufacturing sectors. These include electronics components, capital goods, and solar manufacturing, areas where India is seeking to deepen domestic production capacity and strengthen supply chains.

Government approval data for FY2025-26, covering April 2025 to March 2026, offers a closer look at how India is handling China- and Hong Kong-linked investments under the screening regime.

During the financial year, Hong Kong received 13 approved FDI proposals valued at INR 6.104 billion, equivalent to about $64.25 million. This made Hong Kong the leading source of government-approved investment proposals by number of approvals. Mainland China, in comparison, had just one approved proposal worth INR 10 million, or around $0.11 million.

Hong Kong’s position is even more notable when compared with other major investor jurisdictions. It recorded more approved proposals than Singapore, the United Kingdom, and the United States, each of which had five approvals, as well as Japan and Switzerland, which each had four.

The approval numbers suggest that Hong Kong-based investors are considerably more active than mainland Chinese investors in seeking formal government clearance for India-related investments. They also point to India’s more selective and calibrated approach toward China-linked capital, allowing transactions that meet eligibility requirements while continuing to review investments involving higher ownership, control rights, or sensitive sectors.

Company-level data further shows how China-linked capital has entered India over the past two and a half decades. The largest individual investments have generally been concentrated in manufacturing, automobiles, industrial production, renewable energy, and financial services.

Among the biggest recorded FDI remittances was an investment of $229.38 million by SAIC General Motors Investment Ltd. into General Motors India Pvt. Ltd. for passenger car manufacturing. Several other sizeable SAIC-linked remittances into General Motors India were also recorded, including investments of $118.42 million, $117.74 million, $75.86 million, $73.16 million, $69.38 million, $40.20 million, $34.79 million, and $29.94 million.

China-linked capital has also been present in India’s digital economy. Alipay Singapore Holding Pte. Ltd. made an investment of $149.18 million into Zomato Media Private Limited, supporting digital publishing and online services.

In the automotive sector, Beiqi Foton Motors Co. Ltd. invested $93.86 million in Foton Motors Manufacturing India Pvt. Ltd. for commercial vehicle manufacturing. In financial services, Invesco Hong Kong Limited remitted $70.14 million to Religare Invesco Asset Management Company for mutual fund management.

Renewable energy and industrial manufacturing also feature in the investment record.

The Asian Infrastructure Investment Bank invested $33.34 million in AMP Energy India Private Limited for solar power generation. TBEA Shenyang Transformer Group Ltd. invested $32.83 million in TBEA Energy India Pvt. Ltd. for power transformer manufacturing, while Baosteel Resources Co. Ltd. invested $32.80 million in VISA BAO Ltd. for ferro-alloy manufacturing. China Steel Corporation also invested $29.36 million in China Steel Corporation India Pvt. Ltd. for steel manufacturing.

Taken together, the latest DPIIT figures show that direct FDI from mainland China into India remains relatively limited, despite some improvement in 2025. Hong Kong, meanwhile, continues to hold a stronger position both in cumulative FDI inflows and in the number of government-approved proposals.

The broader message from the data is that India is attempting to strike a careful balance. On one hand, the government is providing more clarity for investors that fall below control thresholds or operate in non-sensitive areas. On the other, it continues to maintain scrutiny over transactions that may raise security, ownership, or strategic concerns.

Whether the revised Press Note 3 framework leads to a meaningful increase in investment from China- and Hong Kong-linked entities will depend on several factors. These include the speed at which approved projects move forward, the comfort level of global investors with India’s regulatory process, and the broader geopolitical and commercial environment.

For now, the numbers suggest a gradual recalibration rather than a major shift. India is keeping the door open for eligible foreign investment, but it is doing so within a framework designed to protect national interests while offering clearer rules for businesses looking to participate in the country’s growth story.