The Centre has tightened economic security regulations by prohibiting direct participation of both domestic and overseas corporate entities having any “commercial arrangement” with hostile countries such as China and Pakistan, two people aware of the matter said on Wednesday, adding that this has been communicated to all states.

The government has already amended its July 2020 order, making prior screening and registration mandatory for all those bidders who have any commercial arrangement with entities of countries that share a land border with India, they said requesting anonymity. Without naming any particular country, the government on July 23, 2020 restricted purchases for public projects from companies in countries that share a land border with India, citing national security.

The Union government has recently sent a missive to all states, directing them to seek approval before having any business relationship with hostile neighbouring countries due to increased security concerns, they said.

The communication has been sent to all chief secretaries recently after it was noticed that some private firms located in certain states were trying to engage Chinese contractors in infrastructure projects, one of them said. The chief secretary is often the top bureaucrat and principal executive officer in a state.