FDI from China: From Thailand to Brazil, global lessons for India’s cautious playbook

What Happened

• India's Union Cabinet (March 10, 2026) approved amendments to the FDI policy for land-bordering countries — effectively liberalising aspects of Press Note 3 (2020) that had tightly restricted Chinese investment since the Galwan Valley clash.
• Key changes: Investors from land-bordering countries (including China) holding up to 10% non-controlling stakes may now invest through the automatic route; a 60-day fast-track approval timeline was introduced for specified manufacturing sectors (electronics components, capital goods, solar equipment, polysilicon, ingot-wafer production).
• The amendments are structured as a "controlled opening" — strategic sectors like telecom, defence, and sensitive infrastructure remain under mandatory government approval.
• India's move mirrors the pragmatic recalibrations seen in other emerging markets — notably Thailand and Brazil — that have attracted Chinese manufacturing investment while managing dependency risks.
• Of 526 proposals from land-bordering countries between 2020 and 2024, only 124 received approval under Press Note 3 — suggesting the earlier regime was a significant bottleneck.

Static Topic Bridges

India's FDI Policy Framework: Routes, Sectors, and Press Notes

India's FDI policy is governed by the Consolidated FDI Policy (issued by DPIIT — Department for Promotion of Industry and Internal Trade) and operationalised through the Foreign Exchange Management Act (FEMA), 1999. FDI enters through two routes: the Automatic Route (no prior government approval needed, subject to sectoral caps) and the Government Route (prior approval required from competent authority). Press Notes are administrative circulars issued by DPIIT that modify FDI policy between formal policy updates. Press Note 3 (2020) made all investments from land-border countries (China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, Afghanistan) government-route-only — a sweeping restriction ostensibly for national security but operationally affecting Chinese capital most significantly. The 2026 amendment (Press Note 2, 2026) creates a tiered structure: ≤10% non-controlling stakes via automatic route; >10% or controlling stakes still require government approval; sensitive sectors retain full government scrutiny.

China's "Factory to the World" Model and Global FDI Dynamics

China's rise as the dominant global manufacturer was built on massive FDI inflows (1980s–2000s) combined with state-directed industrial policy, cheap labour, and deep supply chain integration. As China's costs rose and geopolitical tensions mounted, Chinese companies began investing outward — particularly in Southeast Asia (Thailand, Vietnam, Indonesia) and Latin America (Brazil, Mexico). Thailand's Eastern Economic Corridor (EEC), launched 2017, actively courted Chinese manufacturing FDI in electronics, EVs, and petrochemicals. Brazil attracted Chinese investment in mining, agriculture, and infrastructure. The global pattern: host countries gain technology transfer, employment, and supply chain integration but face risks of local industry displacement, strategic dependency, and intellectual property concerns. India's cautious position: attract Chinese capital for supply chain resilience (especially electronics and solar) without creating dependencies in sensitive sectors.

India's Electronics and Solar Manufacturing: Why Chinese FDI Matters

India's electronics production reached approximately $115 billion in FY2024–25, with a target of $500 billion by 2030 under the National Policy on Electronics (NPE). The Production Linked Incentive (PLI) Scheme for large-scale electronics manufacturing (outlay: ~₹41,000 crore) has attracted Samsung, Apple suppliers (Foxconn, Tata Electronics), and others. However, India's electronics supply chain remains heavily dependent on Chinese components — capacitors, PCBs, displays, semiconductors — imported at scale. The domestic solar manufacturing ecosystem similarly depends on Chinese polysilicon and ingot-wafer supply. The 60-day fast-track window created under the 2026 amendment specifically targets these supply chain chokepoints: polysilicon, ingot-wafer, electronic components, and capital goods for manufacturing — precisely the areas where Chinese firms have dominant manufacturing capabilities.

Key Facts & Data

• Press Note 3 (2020): All land-bordering country investments routed through government approval
• Land-bordering countries: China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, Afghanistan
• Approvals under PN3 (2020–2024): 124 of 526 proposals approved (~24% approval rate)
• Press Note 2 (2026): ≤10% non-controlling stakes — automatic route; >10% or strategic — government route
• 60-day fast-track sectors: Electronics components, capital goods, polysilicon, ingot-wafer, electronic capital goods
• China's outward FDI stock: ~$2.96 trillion (2023)
• India electronics production: ~$115 billion (FY2024–25); PLI target ~$500 billion by 2030
• India solar import dependency: ~70–80% from China
• China controls ~80% of global polysilicon, ~95% of wafer manufacturing
• Galwan Valley clash: June 2020 — precipitated Press Note 3 restrictions
• DPIIT: Nodal ministry for FDI policy under Ministry of Commerce and Industry