Customers are seen at a store of Chinese technology company Xiaomi in Chennai, India, Oct. 8, 2019. (Xinhua/Lui Siu Wai)

Chinese investor confidence in the India's market is being harmed by that government's tough measures targeting Chinese businesses, and will hit India's economy hard considering global investment has been scarce amid the COVID-19 outbreak, Chinese businesspeople in the country say.

Reuters on Tuesday reported the country is reviewing 50 investment proposals by Chinese companies under a new screening policy, citing sources with the Indian government. The report didn't name the companies or its sources.

India is reportedly planning to introduce tougher rules during its review of foreign direct investment to guard against so-called opportunistic takeovers of indigenous corporate assets.

A source with a large Chinese business in India told the Global Times on Tuesday, on condition of anonymity, that the Indian government's changes to its foreign direct investment policy and the COVID-19 pandemic in the country, have affected investment in India.

His company closed its branch in India in April, and all Indian staff was laid off, the source said.

Although the Chinese company is still preparing review documents in accordance with the government's requirements, the source said that given the current situation shutting down investment in India would prevent further losses.

Another person with another Chinese company in India who also asked not to be named told the Global Times that the Indian government's closure of Chinese mobile apps such as WeChat has greatly worried other Chinese businesses in the country. 

"There is fear that if the situation is getting worse, confidence in investing in India will be affected," he added.

India's banning of  59 Chinese apps and its tough stance on Chinese electric and auto equipment exports from China, is not right, Qian Feng, director of the research department of the National Strategy Institute at Tsinghua University in Beijing, told the Global Times on Tuesday.

The moves are especially hurtful considering foreign investments are a valuable contributor to the local market, especially since global investment has been greatly impacted by the COVID-19 outbreak, Qian said. 

"To some extent, China's economic and trade cooperation and investment have brought more tangible benefits to India than India has brought to China," Qian said.

Over 500 million Indians are now using smartphones, a 15 percent increase since 2018 and they are primarily using Chinese-made Xiaomi and Realme phones that continue to bring new users to the telecom sector, according to Indo-Asian News Service on January 30.

"The reason Xiaomi and Vivo are so popular in India is because they cost less than an iPhone and other products. They make mobile phones affordable to more Indian people," Qian said.

India stepped up scrutiny of investments from companies based in neighboring countries in April, mainly aiming to prevent China from acquiring local companies at a lower price during the coronavirus, said Liu Xiaoxue, an associate research fellow at the National Institute of International Strategy under the Chinese Academy of Social Sciences, adding that the recent China-India political spat has also pushed India to guard against Chinese investment.

But Liu said that it's unlikely that India would completely shut out Chinese investment, as investment from China is important to India, which is in a rush to develop its economy.