For a Chinese investor, the choice of structure is partly a choice of how the Press Note 3 approval will look. A wholly owned subsidiary needs approval for 100% Chinese ownership. A joint venture with an Indian partner may be easier to approve and, in the fast-track manufacturing sectors, a structure with Indian majority ownership and control is reportedly expected. A branch or liaison office needs RBI approval and clears the land-border check in a separate way. An Employer of Record can be a first step for hiring, but not a way to avoid the rules.
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Key facts
| Wholly owned subsidiary | Full control; needs government approval for a 100% Chinese stake; sector caps apply |
|---|---|
| Joint venture | Shared ownership with an Indian partner; approval covers the Chinese stake; shareholder agreement must match the approval |
| Branch office | Parent's own activities; RBI approval with land-border-country security review; net worth USD 100,000 and a five-year profit record |
| Liaison office | Liaison only, no income; RBI approval; net worth USD 50,000 and three years of record |
| LLP | Allowed in eligible sectors; FEMA conditions; approval still applies for Chinese partners |
| Employer of Record | A third party employs staff on its entity; not a way to avoid the rules |
| Via a third-country vehicle | Does not avoid Press Note 3 where Chinese beneficial ownership or control exists |
Structures compared
| Structure | Best for | Press Note 3 and approval | Main limits |
|---|---|---|---|
| Wholly owned private limited company | Sales, development, assembly, captive teams | Government approval required for the Chinese stake | Two directors (one resident); audit and ROC compliance; sector caps |
| Joint venture company with an Indian partner | Manufacturing, distribution, access to local relationships | Approval required for the Chinese stake; fast-track manufacturing sectors reportedly look for Indian majority ownership and control | Shareholder agreement, deadlock and exit terms; FEMA pricing for transfers |
| Branch office | The parent's own services or trading in permitted activities | RBI approval and security review for land-border-country applicants | Profit record test; taxed as a foreign company at higher rates; parent directly liable |
| Liaison office | Liaison and market research | RBI approval and security review | No income or invoicing; costs funded from China |
| LLP | Professional or service partnerships in eligible sectors | Approval applies to Chinese partners | Tax and FEMA review; limited use for manufacturing |
| Employer of Record | A first hire or a short pilot | Not a route around approval for operating a business | The EOR is the legal employer; control and PE risk |
Joint ventures with an Indian partner
- Many Chinese manufacturers look at joint ventures with Indian companies, particularly in electronics and components. The approval application should describe the JV, the Chinese stake and the technology or supply arrangements.
- The shareholder agreement should match what was approved: shareholding, board seats, vetoes and transfer restrictions. Changes that increase Chinese control may need fresh approval.
- Agree the technology licence, supply and brand terms at arm's length. See transfer pricing.
- Plan the exit before the entry: call and put options, drag and tag rights, and valuation, within FEMA pricing rules. See exit and restructuring.
- More on manufacturing models: manufacturing and joint ventures.
Why a third-country holding company is not a shortcut
The amended policy looks at beneficial ownership and control. A Singapore or Hong Kong holding company owned by a Chinese parent leaves the Chinese beneficial owner above the threshold, so the approval requirement remains. Using such a vehicle without disclosing the Chinese ownership risks a FEMA contravention and trouble with the bank and the Registrar.
A quick way to choose
- Operate with your own team and full control, in a sector open to foreign investment: wholly owned subsidiary.
- Need local partner, land, licences or customer access: joint venture.
- Only market research and liaison: liaison office, if you meet the tests.
- One or two hires for a pilot: Employer of Record, then convert.
Cost and time
A subsidiary has the highest setup cost but the cleanest long-term position. A joint venture adds legal and valuation costs for the partner agreement. Branch and liaison offices need RBI approval, which can take months. Plan the approval time into the project calendar. See incorporation steps.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, MOFCOM (China), SAFE (China) and the Ministry of External Affairs (India).
Frequently asked questions
Which structure suits a Chinese company entering India?
A private limited company, wholly owned or as a joint venture with an Indian partner, is the most common. All routes need government approval where the investor is Chinese.
Can a Chinese company open a branch office in India?
Yes, with RBI approval, a net worth of USD 100,000 and a five-year profit record, plus a security review for land-border-country applicants.
What can a liaison office do?
Liaison and market research only, with no income or invoicing. It needs RBI approval and USD 50,000 net worth with a three-year record.
Is an Employer of Record a way around Press Note 3?
No. It is a hiring vehicle for a pilot. If the real business is in a restricted sector or Chinese-controlled, the approval requirement still applies.
Does a joint venture with an Indian partner avoid Press Note 3?
No. The Chinese stake still needs approval. A structure with Indian majority ownership and control may help in the fast-track sectors.
Can I use a Hong Kong or Singapore holding company?
It does not avoid Press Note 3 where Chinese beneficial ownership or control exists, and mis-describing the structure is a FEMA risk.
Related guides
Press Note 3 for Chinese Companies: When Government Approval Is Needed and What the 2026 Easing Changes
How India's Press Note 3 (2020) applies to a Chinese parent: prior government approval for investors incorporated in China, the 2026 easing for passive minority land-border ownership, the control test, the 60-day sectors, director clearance and planning.
Read the guide →Manufacturing in India with a Chinese Partner: Approval, Joint Venture Terms, Technology Licences and Local Content
How Chinese manufacturers approach India: joint ventures with Indian partners, the 60-day fast-track sectors under the amended Press Note 3, incentive schemes, technology licences, supply chains, customs and the practical limits.
Read the guide →Setting Up the Indian Subsidiary After Approval: Step-by-Step Plan for a Chinese Parent
The step-by-step plan for incorporating an Indian private limited company owned by a Chinese parent: Press Note 3 approval, documents, director clearance, SPICe+, bank account, funding, RBI reporting and the first 180 days.
Read the guide →Funding an Indian Subsidiary from China: Equity, Convertible Instruments, ECB Loans, SAFE Remittance and FC-GPR
How a Chinese parent funds an Indian subsidiary: equity pricing and valuation, compulsorily convertible instruments, external commercial borrowing, the Chinese SAFE step, inward remittance, FC-GPR and the 60-day and 30-day clocks.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Chinese rules change often; confirm current requirements before acting.