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Selective easing of restrictions on Chinese companies bidding for government contracts

ICICIdirect Research 16 Jan 2026 DISCLAIMER

The Government of India is reportedly evaluating a selective easing of restrictions on Chinese companies bidding for government contracts, which were imposed in 2020 on security grounds. The move is being considered amid execution delays and supply constraints across key infrastructure segments such as power generation, transmission, railways and large EPC projects. The development has revived concerns around competitive intensity and pricing pressure, especially given the dominance of PSU-led procurement in the sector.

Background of Restrictions

Under the 2020 framework, Chinese bidders were required to obtain security clearance and register with a government-appointed committee, effectively excluding them from PSU-led tenders. These curbs are estimated to have kept Chinese OEMs out of ₹700–750 billion worth of government procurement, significantly reshaping competitive dynamics in capital goods and infrastructure ordering.

Rationale Behind the Review

The reported policy rethink appears driven by capacity bottlenecks in critical equipment, particularly in power and transmission. India’s power sector is entering a phase of accelerated capacity addition, including large thermal projects and grid expansion, where availability of boilers, turbines, generators, transformers and high-voltage equipment has become a key constraint, contributing to project slippages and elevated pricing.

Policy Status: No Blanket Relaxation

There has been no official government notification lifting the 2020 restrictions on Chinese firms. However, market commentary indicates that approvals are being granted on a case-by-case basis, rather than through a broad-based policy change. Any participation is expected to be restricted to future bids, limiting immediate disruption.
According to media reports, the current situation is materially different from earlier cycles when Chinese players aggressively undercut prices. Experts, highlighted that capacity utilisation across the transformer and transmission equipment industry is currently high, with factories largely operating at full levels. As a result, sharp price erosion or earnings impact is not expected in the near term. The development has created a sentiment overhang, but not a fundamental deterioration in sector economics.

Transmission Segment: Selective Chinese Participation

Media reports suggest that Chinese power equipment manufacturer TBEA, which has had a manufacturing presence in India since 2014, has reportedly received approval to supply high-voltage reactors to government entities from the next financial year. These components are used in 400 kV and 765 kV transmission systems, a segment where domestic players are already operating at high utilisation levels. Importantly, this does not imply a reopening of imports, as participation is understood to be through India-based manufacturing facilities and limited equipment categories.
 
Indian players with significant exposure to power equipment, transmission and PSU-led tenders include Hitachi Energy India Limited, GE Vernova T&D India, CG Power and Industrial Solutions, Bharat Heavy Electricals Limited, Siemens Limited, ABB India Limited, Transformers & Rectifiers India Ltd, and Larsen & Toubro Limited. Due to this these stocks has witnessed significant stock price correction of about 5-10% in recent sessions amid volatility in the market.

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