Chinese Investment In Indian Startups Is Now A Distant Dream

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When the Indian Government changed its FDI policy in late April, China got handed the short end of the stick for investing in India’s homegrown companies.

Now, following up on the same, over a hundred applications from Chinese investors seeking to invest in the Indian startup ecosystem are stuck in limbo.

The Indian Government, which still maintains all the strict rules it enforced, is currently going through all the Chinese-origin proposals from Beijing and Hong Kong with a fine hair comb.


Sources in the know which include government officials, lawyers representing investors and startups have revealed that one cannot expect clearances, when it comes to the injection of funds coming from China, anytime soon. The geopolitician situation between both countries is yet to improve.

In April, amid the rising tensions at the Indo-China border, the Indian Government brought about a regulation in the Foreign Direct Policy of India which required investments coming from countries sharing a land border with India to be cleared by the Government before it proceeds further.

China Investment: Strict Screening

This change discarded the earlier easy automatic route and adopted a process which is way more stringent. There now appears to be more follow up questions, the requirement of additional information by various departments and a thorough examination of all proofs by the Department for Promotion of Industry and Internal Trade aka DPIIT.

The Indian Government seems to also be demanding that representatives of the investors fly down to India and provide all necessary information in person rather than on phone calls or Zoom.

A lawyer who is currently having to deal with this process mentioned that all Indian government agencies are forcing the investment applications to undergo several checks so that it can rightly be identified if the money is flowing in from China.


According to government officials, a single approval is now taking anywhere between 2-3 months for getting approved.

Besides this, along with DPIIT, the Ministry of Home Affairs is also involved in the clearance process of investment applications. Unless MHA gives a particular application the green signal in terms of security, approvals are highly unlikely to be provided.

Non-Chinese Investors Got Advantage

In the past year, a whopping $4.6 billion was poured into Indian startups by Chinese investors; however, now it seems like the window is closing on the same.

Realizing it as a great investment opportunity, other countries have begun taking the lead when it comes to pumping cash in the Indian startup ecosystem.

Since the news of the renewed FDI policy of India broke, many consumer-facing startups which previously raised boatloads of capital from Chinese-origin investors have moved on to raising capita from non-Chinese investors.

One such example is the Gurugram-based food delivery giant Zomato which, earlier this month, raised $100 million from Tiger Global Management whom they welcomed as a new investor.

European and U.S investors who entered into the startup space in India long before Chinese investors did are once again taking centre stage.

Dream11, an online fantasy sports platform, recently raised $225 million from Tiger Global Management, TPG Tech Adjacencies (TTAD), ChrysCapital and Footpath Ventures. This signals that other Indian startups may soon follow suit to move away from Chinese capital as well.

Now, it remains to be seen if and when the situation gets better for Chinese investors who are currently stuck at the tail end of a long line of Indian bureaucracy. We will keep you updated. Until then, stay tuned.


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