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India: the main leaders of Chinese companies in India under the spotlight

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Indian authorities are closely scrutinizing directors and other key staff of Chinese companies registered in the country to verify whether they are real companies and not fictitious entities.

The survey overseen by the Ministry of Commercial Affairs will check whether the same group of people sit on multiple boards, which would indicate front companies with no real economic activity in India.

“There have been instances where people have been on the board of multiple companies,” a senior government official told ET, explaining the reason for the review.

“The idea is to look at the sincerity of the functioning of the entities and the role of the leaders.”

These shell companies will be deregistered to prevent them from doing business in India.

The ministry is in the process of identifying and delisting front companies that have been involved in predatory lending by Chinese lending apps without regulatory oversight. The government is investigating the entities and individuals involved in facilitating these loan applications.

This review has been widened to include all Chinese companies, amid concerns that similar abuses could also take place in other sectors. Several agencies are now involved in the investigation of Chinese companies.

The review includes checking the details of Chinese nationals in key company positions in India to see if they are directors in more than one company. This will allow authorities to identify genuine shell companies, the official quoted above said.

Earlier this year, the Interior Ministry identified 348 mobile apps, including those developed in China, that collected and transmitted information in an unauthorized manner to servers outside the country.

In April 2020, New Delhi amended the Foreign Direct Investment (FDI) policy and made a prior government nod mandatory for foreign investment from countries sharing a land border with India. These amendments meant that any foreign direct investment from Bangladesh, China, Pakistan, Nepal, Myanmar, Bhutan and Afghanistan had to be approved by the government, even if the sector concerned was on the way to automatic approval. The measure was seen as largely targeted at Chinese investment.

An inter-ministerial committee has been set up to review proposals involving FDI from China. Such an investment also required security clearance from the Ministry of the Interior. A similar condition has been introduced for companies applying for any supply contract, whether for goods or services.