India, China may build new framework for investments
India and China are reported to be exploring a new framework for business exchanges and investment cooperation, expected to be discussed around Chinese President Xi Jinping's anticipated visit to India for the BRICS Summit
The discussions reportedly include a proposed special economic zone offering easier sea-route access for Chinese enterprises, alongside continued easing of approval requirements for Chinese investment in non-strategic sectors
The move builds on India's earlier relaxation of its post-2020 FDI approval regime for investments from countries sharing a land border with India
Both sides are reported to be working toward improving overall bilateral ties and managing outstanding differences following a multi-year diplomatic and economic freeze
Press Note 3 (2020) and its 2026 Relaxation
Press Note 3, issued by the Department for Promotion of Industry and Internal Trade (DPIIT) in April 2020, mandated prior government approval for any foreign direct investment (FDI) from entities based in, or with beneficial ownership traced to, a country sharing a land border with India — covering China, Pakistan, Bangladesh, Nepal, Bhutan, Afghanistan, and Myanmar. It effectively ended automatic-route FDI from China.
Key Details
- Issued in April 2020, ostensibly to prevent opportunistic takeovers of India firms during the COVID-19 slowdown, and reinforced in effect after the Galwan Valley clash of May 2020
- In 2026, the Union Cabinet approved amendments (referred to as Press Note 2, 2026) creating a three-tier framework: automatic-route approval for non-controlling stakes up to 10%, a 60-day fast-track approval window for priority manufacturing investment, and continued case-by-case scrutiny for larger or strategic-sector stakes
- Strategic sectors (defence, telecom, and other security-sensitive areas) remain outside the relaxation and continue to require full government approval
- Reported inflows under the relaxed regime crossed roughly ₹4,896 crore across 29 projects within months of the 2026 easing, concentrated in electronics, manufacturing, and pharmaceuticals
The proposed new investment framework and special economic zone reportedly under discussion for Xi Jinping's visit would build on this partial 2026 relaxation, potentially extending further ease-of-approval measures for non-strategic sector investment.
India-China Relations Post-Galwan (2020-2026)
The Galwan Valley clash of June 2020 — the first fatal India-China border confrontation since 1975 — triggered a prolonged diplomatic and economic freeze, including troop disengagement talks, banning of Chinese mobile apps, and the FDI restriction under Press Note 3.
Key Details
- Disengagement along friction points in eastern Ladakh proceeded through multiple rounds of Corps Commander-level talks and the Special Representatives (SR) mechanism (established 2003) on the India-China boundary question
- A reported thaw began with the resumption of direct flights, the restoration of some visa categories, and renewed high-level diplomatic contact in 2024-2025
- Xi Jinping's expected visit to India for the 18th BRICS Summit would mark his first visit since the Galwan clash, positioned as a milestone in normalising ties
- BRICS, established in 2009 (as BRIC; South Africa joined in 2010), expanded in 2024 to include Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE as new members
The investment-framework talks are being timed around the prospective BRICS Summit visit, using a multilateral platform to anchor a bilateral economic normalisation track.
Special Economic Zones (SEZ) Policy Framework
A Special Economic Zone is a demarcated enclave treated as a "foreign territory" for trade and duty purposes, offering tax incentives, simplified customs procedures, and infrastructure support to attract export-oriented investment.
Key Details
- India's SEZs are governed by the SEZ Act, 2005 and SEZ Rules, 2006, administered by the Ministry of Commerce and Industry through Development Commissioners for each zone
- SEZ units are eligible for exemptions from customs duty on imports/exports and were earlier eligible for phased income-tax holidays under Section 10AA of the Income Tax Act (for units commencing operations before specified sunset dates)
- SEZs are distinct from Free Trade Warehousing Zones and Coastal Economic Zones (CEZs, under the Sagarmala programme), which focus specifically on port-linked manufacturing and logistics
- A dedicated SEZ for Chinese investment with "easier sea route access" would echo earlier proposals (raised as far back as 2014-2015) for China-specific industrial parks in India, most of which did not materialise at scale due to the subsequent border tensions
The proposed new SEZ with sea-route access for Chinese investment reflects a return to pre-Galwan era proposals for dedicated China-linked industrial infrastructure, now being revived as part of the broader normalisation effort.
- Press Note 3 issued: April 2020; land-border countries covered: China, Pakistan, Bangladesh, Nepal, Bhutan, Afghanistan, Myanmar
- 2026 FDI relaxation (Press Note 2, 2026): automatic route up to 10% non-controlling stake; 60-day fast-track window for priority manufacturing
- Reported FDI inflow post-relaxation: approximately ₹4,896 crore across 29 projects (as of August 2026)
- Galwan Valley clash: June 2020, eastern Ladakh
- Special Representatives mechanism on the India-China boundary question: established 2003
- BRICS: founded 2009 (as BRIC), South Africa added 2010; expanded 2024 to add Egypt, Ethiopia, Iran, Saudi Arabia, UAE
- SEZ Act: enacted 2005; SEZ Rules: 2006