India to scrutinize of new portfolio investors from China, Hong Kong

India has drafted rules proposing tighter scrutiny of new Foreign Portfolio Investors (FPIs) from China and Hong Kong, three government sources told Reuters.

India is making its latest effort to check foreign inflows during the coronavirus pandemic.

The discussions come weeks after India said it will screen all foreign direct investment (FDI) from countries with which it shares a land border, a move it said was aimed at staving off takeovers when asset prices are depressed during the coronavirus pandemic. The Chinese government described the policy as discriminatory.

FDIs are longer-term direct investments that typically provide control over a firm’s management. But concerns had risen in the government the policy change could prompt Chinese investors to ramp up their investment in India as portfolio investors, purchasing company securities such as equities to gain control, officials in New Delhi said.

Two senior government sources said India could set up a body to scrutinize new FPI registrants from countries such as China, and the rules will also apply to Hong Kong, a special administrative region from where substantial Chinese investments are routed.