Private equity/venture capital (PE/VC) investments into India from China and Hong Kong have seen a substantial drop in 2020.
Investments from these two regions combined have declined 72 per cent to $952 million this calendar year, from $3.4 billion in 2019, the data from Venture Intelligence shows. Investments from Mainland China have reduced 64 per cent to $377 million, while those from Hong Kong have fallen 75 per cent to $575 million in 2020. Also, over 150 applications concerning investments from Chinese entities have been pending since the introduction of press note 3 (PN3) for FDI in April, according to law firm Khaitan & Co.
The new PN3 norms and lack of clarity on what constitutes beneficial ownership are the primary reasons for the decline in investments from China and Hong Kong, experts believe. PN3 has especially dealt a major blow to start-ups by depriving them of funds from cash-rich China/Hong Kong-based investors.
The PN3 guidelines state that an entity of a country that shares a land border with India can invest only under the government route. The guidelines also included the beneficial owner (BO) of an investment into India who is located