China’s access to India’s government procurement system is back on the discussion table after the international news agency, Reuters, reported that the Finance Ministry is considering easing restrictions on Chinese companies bidding for public contracts. In a flash note published this week, Jefferies assessed how different parts of India’s defence, power, railways, and infrastructure systems could be affected if restrictions are eased. At the outset, the brokerage stated that this is a developing issue and that “details awaited”.
The curbs were introduced after the India–China border clash and required firms from countries sharing land borders with India to undergo additional political and security clearances. Reuters, quoting sources, reported that officials are working on removing the registration requirement following requests from ministries citing shortages and project delays. The report, however, said the final decision rests with the Prime Minister’s Office, and officials were not authorised to speak publicly.
Jefferies on defence seeing the lowest impact
Jefferies placed defence at the bottom of its impact assessment. In the flash note, the brokerage stated, “Defence should see the lowest impact, followed by Cummins India.”
The brokerage did not add any further qualifiers to its defence assessment in the note. Defence was listed separately from power, railways, and infrastructure in Jefferies’ ordering of potential exposure.
Jefferies on why clarity is still awaited
Jefferies repeatedly stressed that the policy position is not yet confirmed. In the note, the brokerage stated, “Details awaited: In 2020, post India-China border tensions, the Government restricted bidding by Chinese companies in government contracts through additional scrutiny of bidders from countries sharing a border with India.”
It added, “News reports suggest this restriction is likely to be lifted, with thermal power equipment and railways being highlighted.”
Jefferies then cautioned, “We await clarity on whether this development will materialise and the nuances if it does.”
Jefferies on thermal power and railways being named in reports
Jefferies explicitly referred to the segments being discussed in public reporting. The brokerage stated, “Published news articles suggest that India could lift restrictions on Chinese companies for bidding on government contracts that were put in place since 2020.”
It added that “thermal power equipment and railways” had been “highlighted”.
Reuters reported that curbs on imports of Chinese power equipment had hindered India’s plans to raise thermal power capacity over the coming decade and that easing the restrictions followed requests from ministries facing shortages and project delays.
Jefferies did not provide estimates or projections for these segments and limited its comments to identifying them.
Where the China+1 narrative fits in, according to Bernstein
The policy discussion around Chinese participation in government contracts is unfolding alongside a reassessment of the China+1 narrative. In its India Strategy Outlook, Bernstein said expectations of a large supply chain move away from China have weakened.
The brokerage wrote that the last year showed “it is entirely possible that a bigger adversary like China eventually has far lesser tariffs than India for most of its products.”
Bernstein added that with the US-China tariff truce extended, “the tariff advantage erodes and an extensive China+1 exodus from the northern neighbour should be stalled, unhelpful for key exporters.”
The Bernstein note also pointed to India’s growing dependence on Chinese imports, stating that “India’s imports from China have continued to increase, helped by cheaper products.” The brokerage did not comment on procurement policy but described these trends as part of a broader reassessment of supply chains.
Jefferies on companies likely to see the highest impact
Jefferies ranked companies based on potential exposure if Chinese participation resumes. The firm said, “L&T, Afcons and BHEL are likely to see the highest impact.”
The brokerage did not provide further explanation or quantification in the note and did not revise recommendations or valuations alongside this statement. One must remember that this is just a Reuters report. There is no official announcement yet.
Reuters reported that the restrictions imposed in 2020 had effectively reduced Chinese participation in government contracts estimated to be worth between $700 -750 billion.
Jefferies on ABB and CG Power following next
After L&T, Afcons, and BHEL, Jefferies continued its ordering of exposure. It noted thatthese companies are “followed by ABB and CG Power.”
No additional commentary was provided in the flash note on the nature or extent of exposure for these companies.
Jefferies on transmission projects facing limited impact
Jefferies addressed transmission and distribution separately from other infrastructure segments. Jefferies said, “T&D (Siemens Energy, Hitachi Energy) could see limited impact, given national security priority towards the transmission grid.”
Reuters did not refer to any proposed easing of restrictions related to transmission or grid projects.
Jefferies on infrastructure and industrial capex as background
Jefferies included infrastructure and industrial capital expenditure data to provide background context. The brokerage noted, “FY26E-29E infra + industrial capex CAGR should be 10% vs 6% in FY24-26E.”
The data was presented alongside tables covering power, railways, roads, and industrial spending. Jefferies did not state that easing restrictions on Chinese bidders would alter these estimates.
Jefferies reiterates the provisional nature of the discussion
Jefferies closed its assessment by restating that the issue remains unresolved. The brokerage stated, “We await clarity on whether this development will materialise and the nuances if it does.”
Reuters also reported that neither the finance ministry nor the Prime Minister’s Office responded to requests for comment.
Conclusion
The Reuters report has brought China’s role in India’s government procurement system back into discussion, five years after restrictions were imposed following the 2020 border clash. Jefferies’ flash note does not assume that a policy change will take place but sets out how different sectors could be affected if restrictions are eased.
According to Jefferies, defence would see the lowest impact, transmission projects could see limited impact, while thermal power and large infrastructure contractors could face higher exposure.