India Plans to Lift Restrictions on Chinese Firms Bidding for Government Contracts
NEW DELHI, Jan 8 – India’s finance ministry is preparing to remove five-year-old restrictions on Chinese companies bidding for government contracts, according to two government sources, as New Delhi looks to revive commercial ties amid reduced border tensions.
The restrictions, introduced in 2020 following a deadly India-China border clash, required Chinese firms to register with an Indian government committee and obtain political and security clearances. These measures effectively barred Chinese companies from competing for Indian government projects estimated at $700–750 billion.
Reuters is the first to report on the government’s plan to ease the curbs. One source said officials are working to eliminate the registration requirement, while final approval rests with Prime Minister Narendra Modi’s office. Both sources spoke on condition of anonymity as they were not authorised to comment publicly. The finance ministry and PMO did not respond to requests for comment.
Restrictions Led to Shortages and Project Delays
The 2020 curbs had an immediate impact. For instance, China’s state-owned CRRC was disqualified from bidding for a $216 million train manufacturing contract. Several government departments have reportedly requested relief from the restrictions, citing shortages and project delays.
A high-level committee chaired by former cabinet secretary Rajiv Gauba has also recommended easing the rules. Gauba is a member of a prominent government think tank.
According to a 2024 report by the Observer Research Foundation, the value of new projects awarded to Chinese bidders fell 27% in 2021 compared to the previous year, totaling $1.67 billion. Curbs on Chinese power equipment, in particular, have slowed India’s plans to expand its thermal power capacity to about 307 GW over the next decade.
Following the Reuters report, shares of Bharat Heavy Electricals (BHEL) dropped 10.5%, while Larsen & Toubro (L&T) fell 3.1%, reflecting market concerns about potential competition from Chinese firms.
A Cautious Thaw in India-China Relations
India’s decision comes amid a broader effort to normalize commercial relations with China. In 2025, Prime Minister Modi visited China for the first time in seven years, agreeing to strengthen trade ties, partly in response to U.S. tariffs on Indian goods and Washington’s warming relations with Pakistan.
Following the visit, India and China resumed direct flights and New Delhi simplified visa approvals for Chinese professionals. Despite the improvement, India remains cautious, maintaining existing FDI restrictions on Chinese companies.
Analysts note that a potential Washington-New Delhi trade deal could further influence India-China economic ties, though the U.S. has continued to send mixed signals regarding the agreement.
