Govt Likely To Cap Chinese Equity Investments In Electronics JVs At 10%

Amid the US tariff war, the Centre is reportedly planning to cap Chinese investments in electronics joint ventures at 10%, contingent on technology transfer, prioritising local manufacturing development.

An ET report, citing officials privy to the matter, said that preference will be given to electronics contract manufacturers or supply chain firms from the neighboring country, rather than Chinese brands, when it comes to equity ownership. 

“As the Indian firms need technology transfer, the government is likely to allow 10% Chinese equity in joint ventures. But there won’t be open gates for Chinese investments in electronics or other sectors,” an official said. 

The officials also told ET that the government is willing to adjust the rules on Chinese equity if the US or European companies seek to shift operations from China to India. In such cases, Chinese suppliers to these firms may be allowed to hold up to a 49% stake, though this would be treated as an exception and each application will be evaluated separately. 

This comes at a time when Chinese companies are showing increased willingness to meet investment conditions, propelled by the US tariff war.

However, Chinese investments in sectors other than electronics and automobiles are witnessing extended wait times. A separate report by Moneycontrol in February noted that investments in areas ranging from private equity to pharmaceuticals continue to face extended waiting periods. 

The Indian government is adopting a more calibrated approach in allowing Chinese companies to invest in India in sectors where it is a strategic priority, it said. 

This was followed by an ET report last year saying that the government is looking at allowing new JVs between Chinese and Indian companies only if the Indian partner holds a majority shareholding. 

Meanwhile, JSW Group is in discussions with a Chinese auto company for electric vehicle (EV) joint ventures. TOI reported in December last year that among the original equipment manufacturers (OEMs) that JSW is in talks with is Chinese auto major Geely.

While China is showing increased interest in Indian electronics markets, the Indian government is looking to bolster homegrown electronics manufacturing capabilities. 

After approving the PLI scheme for electronics components last month, Union Minister Ashwini Vaishnaw recently said that the guidelines for the scheme have been finalised and its online portal will be launched soon. 

The minister said that the scheme is expected to boost domestic production, create jobs and reduce import dependency. 

Meanwhile, the Centre is also preparing to roll out a new design-linked incentive (DLI) scheme worth up to $4 Bn to evolve India’s electronics design ecosystem.

The scheme will target companies working across 30 semiconductor and 30 electronics product categories. The key product categories include modems, WiFi chips, near-field communication (NFC) chips, geolocation chips, 5G radio frequency receivers, power electronics for electric vehicles (EVs), home gateway and security systems, inverters, smart meters, and industrial control systems.

Besides, the government is also mulling over the second phase of the India Semiconductor Mission. Other initiatives include the 2025 Budget’s increased funding for production-linked incentive (PLI) schemes, semiconductor projects, and the IndiaAI Mission.