Changes in Press Note 3 Explained: A Practical Guide for China-Linked Businesses

If you are a Chinese investor or a China-linked business looking at the Indian market, you are likely asking a very simple question. Has India finally become easier to enter?

The practical answer is yes, but only in specific cases.

India recently announced an important update to its foreign investment rules, known as Press Note 3. Starting in March 2026, there is a narrower, smoother path for certain investments to proceed automatically. However, this is not a totally open door. Careful structuring and compliance are still essential. Let us break down what this actually means for your business.

What exactly changed under Press Note 3?

Back in April 2020, India required all investments from bordering countries, including China, to get government approval first. Now, the government has updated this framework.

All the restrictions for investors from land bordering countries (LBCs) are still applicable. There is no relaxation so far as entities or investors in LBCs are concerned. This relaxation is only for entities in non-LBCs and having beneficial owners from LBCs below 10 per cent and non-controlling stake...there are no relaxations as far as investments from LBCs are concerned

Cite- Jai Prakash Shivahare, Joint Secretary, DPIIT 

The new rule allows non-controlling investments of up to 10% to take the "automatic route." This means you might not need prior government approval, depending on your sector and reporting requirements. But structure is everything. This rule focuses on "beneficial ownership." It looks at the actual people behind the investment entity.

What does the 10% rule mean in practice?

This is where many businesses get confused. The Indian government is not just looking at whether a Chinese shareholder owns less than 10% on paper. They are looking closely at who actually controls the company.

Source: IndianExpress

They will check if your investor structure gives you control through management rights, shareholder agreements, or policy influence. If the structure gives you control, you are pushed back into the restricted category and will need government approval. This is why every China-linked investment still needs a careful, case-by-case review before you assume the automatic route applies.

Faster decisions for manufacturing:

Source: Thomson Reuters

There is excellent news if you are in the manufacturing sector. The March 2026 update introduces a fast-track 60-day approval timeline for specific industries.

If your business involves capital goods, electronic components, polysilicon, or ingot-wafer manufacturing, your application will be processed much faster.

India is pushing hard for manufacturing growth and supply-chain integration. If you want a commercially viable operating presence in electronics or industrial manufacturing, this policy shift is highly relevant to your plans.

Can you still open a branch or liaison office?

Yes, and businesses often overlook this practical option. India's central bank allows authorized banks to approve branch, liaison, or project offices for applicants from China, Hong Kong, or Macau in many parts of India.

This means you can establish a representative presence or run a specific project even while your formal equity investment is being reviewed. 

Keep in mind that you still need prior approval to buy property for these offices, and there are strict rules on what activities these offices can perform. It is a strategic option, not just a simple form to fill out.

The bigger picture in 2026

This policy change aligns with other positive developments. India has been actively reducing the red tape around business visas for Chinese professionals. With executives and professionals making business visits to India in rising numbers, the commercial environment is becoming more practical. The rules are still strictly monitored, but they are far more workable than they were a few years ago.

What should you prepare before moving forward?

Good planning will save you from delays and avoidable risks. Before you choose your entry route into India, make sure you have clarity on these points:

• Whether your specific corporate structure qualifies for the automatic route.
• If any hidden beneficial ownership issues might trigger extra government review.
• The exact documents you need to prepare overseas.
• How requirements for local directors and registered office addresses will be handled.
• The ongoing compliance tasks you will face after setup.

How KDP can help you enter India:

The main takeaway is that entering India is getting easier for well-planned, correctly structured businesses. A poorly structured entry will still face delays, but a properly planned one can move forward with confidence.

At KDP, we specialize in helping foreign companies enter and operate in India with absolute clarity. We support you through the entire process, from incorporation and document preparation to ongoing annual compliance and regulatory filings.

Ready to start planning your India entry under the 2026 updates? Drop us a text on WhatsApp.

Frequently Asked Questions:

Does the 2026 update mean Chinese companies can invest in India without government approval now?

Not entirely. The regulatory door is open slightly wider, but it is not fully unlocked. You can bypass the government approval process and use the "automatic route" only if your beneficial ownership from a land-bordering country is 10 percent or less, and crucially, you do not have control over the Indian company. If you want a controlling stake or direct ownership above 10 percent, you will still need prior government clearance.

How exactly is the 10 percent beneficial ownership rule calculated?

This is the most critical detail to get right. India applies its anti-money laundering standards to calculate this threshold. Regulators do not just look at who holds the shares on paper. They trace the funds back to the ultimate natural persons behind the investment entity. Furthermore, even if your equity ownership is firmly under 10 percent, if your shareholder agreement gives you control over management, veto rights, or policy decisions, you will lose the automatic route privilege.

Which specific sectors qualify for the new 60-day fast-track approval?

India is highly focused on prioritizing its domestic supply chain and manufacturing capabilities. The 60-day expedited timeline applies specifically to manufacturing proposals in the following areas:

• Capital goods
• Electronic capital goods
• Electronic components
• Polysilicon
• Ingot-wafer manufacturing

Can we start a physical presence in India while waiting for equity approvals? 

Yes, and this is a highly strategic option for many businesses. Authorized banks in India can permit applicants from China, Hong Kong, or Macau to set up a liaison office, branch office, or project office in most parts of India without referring the matter to the central bank (RBI). This allows you to have a representative footprint on the ground to explore the market, though you will still need separate approvals if you intend to purchase real estate for these offices.

If we previously paused our expansion plans because of Press Note 3, should we restart them now?

It is definitely time to revisit your plans, but with careful structuring. The 2026 updates provide a workable path for minority investments and specific manufacturing setups that simply did not exist a year ago. However, because the rules around "control" and "beneficial ownership" are so strict, proper legal structuring is crucial to avoid triggering the restricted category and causing delays.