New Delhi, Jan. 1 -- The Centre is preparing to significantly relax a five-year-old rule that shut out Chinese capital and put existing investments in limbo, easing the stringent Press Note 3 (PN3) diktat issued in the wake of the pandemic outbreak.

The government is weighing a proposal to exempt investments up to 26% from the rigorous security screening process mandated by PN(3), provided the foreign entity exercises no management control and holds no seat on the company's board, two people familiar with the matter said.

"The Department for Promotion of Industry and Internal Trade (DPIIT) has taken note of the recommendations of a high-level Niti Aayog committee that suggested a softer stance on restrictions on investments from China,"...