Is the Modi government finally getting over its ambiguity about Chinese economic ingress into the country? Two developments hint at the possibility of the government green-lighting further Chinese-affiliated investment under the Press Note 3 rules, which have historically restricted direct investments from countries sharing land borders with India. The approval of the joint venture between Dixon Technologies and Vivo Mobile and the waiver of customs duty on 85 goods used in manufacturing batteries and display assemblies followed the decision to allow four Chinese power equipment manufacturing companies to take part in government tenders for critical power projects.
The development has been in the making for some time now. In response to reports of multinationals diversifying trade away from China post-Covid, the Economic Survey 2023-24 put forth two choices – either integrate more deeply with its supply chains or encourage greater FDI from the country. The survey veered towards the latter option. In line with this thinking, in March this year, the Union cabinet approved changes to the FDI policy for investment from countries that share a land border with India in order to facilitate greater inflows.
Official sources say that, while India has legitimate strategic and security concerns, there are also economic imperatives. A balance must be struck. The domestic manufacturing ecosystem must be deepened, and efforts stepped up to increase value addition and pursue closer integration with global supply chains. “A careful and calibrated approach is needed,” they add.
India had hoped to benefit from the China+1 play, but that has not happened and countries like Vietnam have benefited more. China is inextricably linked to the global manufacturing supply chain. That reality cannot be wished away. China is also a large source of FDI. Its outward investment “has become more targeted, with greater emphasis on greenfield projects, manufacturing, energy, infrastructure and critical raw materials, often in developing economies and along South-South investment corridors”, affirms the World Investment Report by UNCTAD.
Trade ties between India and China have deepened considerably, with imports from China touching $131 billion in 2025-26; and the country now accounts for roughly half of India’s non-oil goods trade deficit. However, FDI from China has been minuscule. Since 2000, investment flows to India have added up to just $2.5 billion.
Dixon-Vivo deal
Under a joint venture between Dixon Technologies and Vivo Mobile India, Dixon will hold a majority 51 per cent stake in the entity, while Vivo will own 49 per cent. Operations are slated to begin by September 2026, allowing Vivo to transition to an asset-light model in India. The strategic partnership is a major development in the local electronics manufacturing sector.
The companies are establishing the JV with an initial paid-up share capital of Rs5 crore, maintaining the 51:49 ratio. Vivo plans to hive off its Noida-based manufacturing unit directly into the JV. The facility is expected to produce roughly two-thirds of Vivo’s annual smartphone production in India (about 23 million units). Brokerage firms have responded favourably to the deal, as the increased production volume is anticipated to strongly boost Dixon’s medium-term revenue and earnings growth.
As for the second development, four Chinese firms, TBEA Energy, Nanjing Electric India, New Northeast Electric India and Taikai Electric (India) will be allowed to participate in the tenders in critical power projects. The exemption comes as India accelerates expansion of its transmission network to support rising electricity demand and renewable energy additions. With the exemption, these companies will be eligible to bid for public sector contracts involving critical power equipment, particularly high-voltage transformers and gas-insulated switchgear, where domestic manufacturing capacity remains limited. The order from the Union power ministry said the exemption would be valid for two years from the date of issuance and should not be treated as a precedent for other companies.
This marks a change from the attitude evident in 2019, when India decided against joining RCEP, a trade agreement spanning 15 Asia-Pacific countries but dominated by China. A few months later, in April 2020, the Centre amended the FDI policy via Press Note 3, making government approval mandatory for investments from countries that share a land border with India. Both decisions were, in part, driven by concerns over China. There appears to be a whittling down of these concerns now.