The IPO could value LIC at $109bn. Credit: Gerd Altmann from Pixabay.

The Government of India is reportedly looking to block Chinese investors from buying shares in the Life Insurance Corporation of India (LIC).

Notably, the government is considering foreign direct investment in the life insurer, which will be capped at a certain level.

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The Indian government is said to be cautious of Chinese ownership in LIC due to the political tension between the countries that reached its peak after the clash along the Himalayan border, Reuters reported citing four senior government officials and a banker.

Last week, it was reported that the government is planning to offload a 5%-10% stake in LIC, which could fetch it nearly $13.6bn (INR1trillion) on the upper end.

The insurer is a leading player in the country’s life insurance market with more than $500bn in assets.

“With China after the border clashes, it cannot be business as usual. The trust deficit has significantly widen(ed),” one of the government officials told the publication.

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The official added that Chinese investment in companies like LIC could pose risks.

Two government officials said that the Government of India is looking for ways to prevent Chinese Investment such as amending the current law on FDI with a clause that relates to LIC or draft a new law for the life insurer.

To check indirect Chinese investment, the government aims to create a policy, while giving safe passage to other overseas investors, they added.

Another option being considered is not allowing Chinese investors to become key shareholders in the IPO, said one government official and the banker.

However, that would not deter Chinese investors from buying shares in the secondary market.