New Delhi, January 8: The Indian government is preparing to remove long-standing restrictions that have barred Chinese companies from competing for public procurement contracts, two government sources told Reuters on Thursday, marking a potential shift in economic engagement between the two Asian neighbors.
Officials in the finance ministry are working on plans to dismantle rules introduced in 2020 that forced Chinese bidders to seek special political and security clearances before being eligible to tender for government projects. Those measures were enacted in the aftermath of a deadly border clash between Indian and Chinese troops and effectively sidelined Chinese firms from public contracts worth an estimated $700–$750 billion.
The restrictions, which had a particularly large impact on sectors such as infrastructure and power equipment supply, were cited by ministries as a factor in project delays and supply shortages. In one notable instance, China’s state-owned locomotive maker was disqualified from bidding on a multimillion-dollar rail contract early in the policy’s implementation.
A high-level committee led by a former cabinet secretary has recommended easing the curbs, according to the sources, who spoke on condition of anonymity because they were not authorised to speak publicly. The final decision will rest with the Prime Minister’s Office in New Delhi.
Market Reaction and Diplomatic Context
News of the possible reversal triggered concerns among investors in Indian infrastructure stocks, with shares of domestic capital goods and equipment manufacturers dropping amid fears of increased competition.
The move comes as bilateral ties between India and China show signs of cautious improvement. In recent months, both countries have restored direct flights, eased visa procedures for business travellers, and engaged in diplomatic exchanges aimed at reducing longstanding friction along the border.
Despite those positive signals, New Delhi has maintained other restrictions, including limits on foreign direct investment from Chinese entities, reflecting broader strategic caution even as it considers rekindling commercial links.
What Comes Next
If approved, the policy change could open government procurement to a wider pool of bidders and potentially accelerate stalled infrastructure projects. However, it also raises questions about strategic competition and the impact on Indian firms in sectors that have benefited from limited competition in recent years. The Prime Minister’s Office has not yet commented on the matter.
