NEW DELHI: All FDI (foreign direct investment) proposals from Chinese entities have been put on hold as they await security clearance from the Ministry of Home Affairs. The Centre is vetting such proposals from China’s Great Wall Motors (GWM), petrochemical major Hengli and Foton China, according to officials aware of the development.

“The objective of the national security clearance is to evaluate potential threats, visible or embedded, in proposals received by the home ministry and to provide a national risk assessment. After a new FDI policy by the Department for Promotion of Industry and Internal Trade (DPIIT), a detailed review of the names of promoters, owners and directors are conducted despite a self-declaration. As many as 175 such proposals are pending for approvals,” a senior government official said.

According to a DPIIT statement: “An entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only through the government route.” The amendment in FDI rules issued in April this year further seeks to curb “opportunistic takeovers or acquisitions of Indian companies due to the Covid-19 pandemic”.

In India, FDI is permitted under two routes: The first, via the automatic mode where the companies do not need an approval from the state and the second, through the government route, for which companies need clearance from the Centre. Officials said the earlier FDI policy via the government route was limited to Pakistan and Bangladesh only.

“Now, 17 sectors, including defence, telecom and pharmaceuticals, need government approval if any company from abroad wants to invest 10% or more. Inputs from financial intelligence units are taken into consideration in sectors which require government approvals,” an official said. The automobile sector is on the automatic approval route but any FDI from China needs government clearance.

Great Wall Motors acquired General Motors’ Talegaon factory near Pune in January. The company had approached DPIIT and the Competition Commission of India before its plan to launch vehicles in India next year, said people with knowledge of the matter.

Last month, India banned 59 Chinese apps, including Bytedance’s TikTok and Tencent’s WeChat, citing threats to national security and public order. The move came after a violent face-off between the armed forces of the two countries in eastern Ladakh on June 15. Officials further said India was keeping a strict watch on the current Chinese investment in India and visas sponsored by these “entities of concern” might require prior security clearance.