Govt to put Chinese FDI plans on hold

The government has decided to put on hold foreign direct investment (FDI) proposals of Chinese nationals and companies till a comprehensive ...

The government has decided to put on hold foreign direct investment (FDI) proposals of Chinese nationals and companies till a comprehensive policy on FDI from China is drawn up.

The ministries of external affairs and finance have conveyed this decision to Foreign Investment Promotion Board (FIPB) after which the Board deferred clearance to a Hong Kong-based Chinese company that wanted to raise its stake in an Indian company.

The proposed policy on investments from China is at present being studied by a Committee of Secretaries (CoS), set up for this purpose by the Cabinet Committee on Security.

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The application by the Hong Kong-based Huawei Tech Investment would be taken up by FIPB after a comprehensive policy on Chinese investments in India was formulated, including all aspects of proposed investments, sources said.

The proposal relates to transfer of shares held by two Indian resident shareholders in Huwei Telecommunications (India) Company Private Limited to Huawei Tech Investment Co Limited, (HTICP) Hong Kong.

The proposed activities of the company are manufacture and marketing of telecommunication products. Earlier, the Department of Telecommunications had raised objections to the proposal as the company had not clearly mentioned the activities proposed to be undertaken.

The foreign company recently submitted details of the activities it planned to undertake to the Board.

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The DoT, which is also the administrative ministry, has also pointed out that the applicant company was engaged in trading activity without a requisite approval.

The FIPB asked the administrative ministries to examine all aspects of the proposal, including the investment made in Huawei Telecommunications (India).

The shareholders had subscribed to the shares at the time of incorporation of Huawei Telecommunications Pvt Ltd in July 2002. Subsequent to the incorporation, the foreign collaborator acquired around 26 lakh equity shares in Huawei Telecommunications.

The initial investment in Huawei Telecommunications is estimated to be around Rs 7.5 crore, and may go up to Rs 40 crore over the next three years. After the proposed transfer, the Indian company will become a 100 per cent subsidiary of the foreign company.

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In 2000, the Ministry of External Affairs had raised objections when Huawei, Hong Kong, had set up a wholly-owned subsidiary Huawei Technologies India Pvt in Bangalore software technology park (STP) to carry out software research and development and exports.

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