Despite Pending PN3 Approval, Some Indian Companies Forge Ahead with Collaborations

Kolkata, February 9, 2026 - Several Indian companies are moving forward with planned collaborations with Chinese firms, even as they await government clearance under Press Note 3 (PN3) or their partners are yet to receive the necessary approvals from Beijing. These companies are initiating preliminary work on projects, anticipating that the required approvals will eventually be granted.

Press Note 3, issued by the Indian government in April 2020, mandates multi-departmental clearance for any equity investment originating from countries sharing land borders with India, including China. The objective of PN3 was to curb opportunistic takeovers of Indian companies during the COVID-19 pandemic. It amended the Consolidated Foreign Direct Investment (FDI) Policy of India, 2017, making government approval a prerequisite for FDI from bordering countries. These countries include Pakistan, Afghanistan, Nepal, Bhutan, China (including Hong Kong), Bangladesh, and Myanmar.

In addition to Indian government approvals, Chinese companies often need clearance from Beijing for equity or technical alliances with foreign entities. This ensures that critical technology, know-how, and intellectual property remain within China.

Delays in receiving PN3 approvals, which can range from three to twelve months, are prompting some Indian companies to commence initial project work to mitigate potential business disruptions. This proactive approach aims to keep projects on track, even though final clearances are still pending.

Dixon Technologies, a prominent Indian electronic contract manufacturer, exemplifies this trend. The company has already begun constructing a factory for manufacturing display modules and has ordered machinery, some of which has already arrived at Indian ports. Dixon is awaiting press note3 (PN3) approval for Vivo JV which was expected around December. Management indicated that they are actively working with authorities and are nearing approval, though the exact timing is uncertain. This JV is projected to substantially increase Dixon's total volume from approximately 3.4 crore units in FY26 to a targeted 6-6.5 crore units, although this target may be delayed to FY28E.

While some companies are optimistic about receiving approvals, others are prepared to proceed independently if necessary. The Indian government is reportedly considering clearing joint venture proposals involving Chinese companies like Haier, Suzhou Innovance and China Highly Group, particularly where the Indian partner holds a majority stake.

The implementation of PN3 has presented challenges, including ambiguities regarding the threshold for identifying 'beneficial ownership'. This lack of clarity has led to an increase in FDI applications requiring government approval, causing delays and extending deal timelines. Some experts suggest that the government should revisit PN3 to clarify these ambiguities and prescribe specific timelines for application approvals or rejections.

Despite the challenges, the Indian government's backing for the sector and its vision to develop a domestic manufacturing ecosystem suggest that a resolution is likely. The extension of the mobile PLI scheme, set to expire on March 31, is also considered a key factor in supporting the industry.