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Countering China? India Moves to Curb ‘Opportunistic’ Takeovers

China taking over vulnerable companies across the world has been a worry for several countries.

Updated
India
2 min read
File photo of PM Narendra Modi and Chinese President Xi Jinping.
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In an attempt to curb opportunistic takeovers and acquisitions of Indian companies during the COVID-19 pandemic, the Government of India has reviewed the country’s Foreign Direct Investment (FDI) policy on 17 April 2020.

As per the new amendment, any entity from a country that shares land border with India will have to go through the Indian Government to make an investment in India. This rules applies if the beneficiary of such investments is located in or is a citizen of one of these countries. 

Similarly, the government has also made it clear in case of change of ownership of any FDI to any entity from a country sharing border with India, permission will have to be sought from the government. This will apply to all existing and future investments, either direct or indirect.

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Step Aimed at China

The government’s move is said to be aimed at China.

China taking over several vulnerable companies across the world, during the financial crisis developed during the spread of COVID-19 has been a worry for several countries.

For India, the People's Bank of China increasing its stake in Housing Development Finance Corp Ltd is said to be one of the immediate triggers for this decision. As per a filing on 11 April, the People's Bank of China’s share in HDFC had increased from 0.8% to 1.01%.

HDFC bank is India’s biggest mortgage lender.

Rahul Gandhi Pushed for the Move

On Saturday, former Congress President Rahul Gandhi took to Twitter to thank the government for “taking note of [his] warning” and amending the FDI norms.

On 12 April, Gandhi had asked the Modi government to ensure steps are taken to prevent the hostile takeovers of Indian companies by foreign entities during the COVID-19 pandemic.

“The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The government must not allow foreign interests to take control of any Indian corporate at this time of national crisis,” he had tweeted.

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