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Chinese firms in India to be scrutinised for potential security threats and links with the Chinese Army

Last month, the Indian government had red-flagged usage of 59 China-linked apps, including TikTok as being a threat to national security.

Several Chinese companies operating and with investment in India are under the scanner of the Indian government for ties with the the People’s Liberation Army (PLA), reported Times of India. Besides, foreign companies in India with investments from China are also under the watch of the Centre.

Reportedly, fresh Chinese investment in Indian companies including startups will now be scrutinized in detail to ensure that they do not pose any security threat. Meanwhile, the Ministry of Finance and SEBI (Securities and Exchange Board of India) is planning to impose checks on FII (Foreign institutional investors) from China while ensuring that it does not affect the Indian market sentiment. “The data are being looked at and the two agencies will decide the threshold and the system of reporting and monitoring,” the report stated.

Concerns about Chinese companies in India have deepened, post the violent clash in the Galwan Valley along the Line of Actual Control (LAC) on June 15. Moreover, several countries have also raised eyebrows over Huawei and ZTE’s participation in 5G technology. Countries including the United States, the United Kingdom, and Australia have banned Huawei from operating in these countries. As per reports, the founder of Huwaei had been involved in PLA’s Engineering Corp. However, the company has maintained that it has no links with the Chinese army.

Indian government scrutinising European companies

The Indian government has raised concerns not only over Huwaei but also foreign investments in Indian startups, a part of China’s ‘military-civil fusion’ policy.  Reportedly, mining, steel, and several Chinese auto companies had links with the PLA in the past. As per the report, the Indian government is also scrutinising ‘overseas entities’ from Europe with investments in Indian companies where the foreign player is controlled by a Chinese company. The Department for Promotion of Industry and Internal trade is finalising the guidelines which include pegging ‘significant beneficial ownership’ threshold at 10% under the Companies Act.

Centre amends FDI norms

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In April, the Ministry of Finance and Industry issued a Press Note 3 wherein it informed that Foreign Direct Investment (FDI) from countries that share a border with India would only be allowed after Government approval. The new rules implied that government approval would also be required for the transfer of ownership of any existing or future investment in India. The amendment to the extant FDI policy was made in light of the opportunistic investments and acquisitions by Chinese firms. Earlier, investment from China was permitted through the automatic except for certain sectors such as Telecom, Defence etc.

Indian Government bans Chinese apps

Last month, the Indian government had red-flagged usage of 59 China-linked apps, including TikTok as being a threat to national security. The Ministry of Information Technology, invoking its power under section 69A of Information Technology Act, with the relevant provisions of the Information Technology Rules 2009 had ordered a block on the use of 59 apps saying that these apps were “engaged in activities which are prejudicial to sovereignty and integrity of India, defence of India, the security of the state and public order”

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