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BEIJING, February 14 (TMTPost)-- China’s leading smartphone vendor Xiaomi Corporation called for the Indian government to take actions to ease increasing concerns about regulatory scrutiny.

Credit：Visual China

Xiaomi requested New Delhi for offering manufacturing incentives and lowering import tariffs on smartphone parts, including the components used in batteries, USB cables and battery covers, Reuters cited a letter dated February 6, which serves as a response to a query from India’s information technology ministry asking how the authority can help develop the country’s component manufacturing. Xiaomi also told the ministry in the letter that heavy scrutiny of Chinese companies has raised smartphone part suppliers’ wary about building operations in India. It believes the tariff cut can increase competitiveness of made-in-India in terms of costs, while it requires bigger incentives for component manufacturers to establish facilities locally.

In the letter, Xiaomi India President Muralikrishnan B. called on the India government to work on "confidence building" measures to encourage component suppliers to set up operations locally. Muralikrishnan noted component suppliers apprehensions related to establish operations in India originated from the challenges faced by companies in the country, especially those China-based. Xiaomi in the letter urged the government to address concerns about compliance and visa issues and work to instill confidence among component suppliers, encouraging them to build manufacturing facilities in India.  

Indian authorities have targeted other Chinese mobile phone makers these years. The Indian Revenue Service under India's Ministry of Finance conducted raids on two "foreign-owned" cell phone companies in various provinces across India on December 21, 2021, and found multiple tax issues in two companies, including royalty evasion and undisclosed related party transactions. Local media reported that the two companies referred to Xiaomi and OPPO. Huawei has been also investigated by the Indian tax authorities since February, 2021.

India’s financial crimes agency, the Enforcement Directorate (ED), announced in April 2022 the seizure of Rs. 55.51 billion of assets from Xiaomi Technology India Pvt.’s bank accounts. The seizure was made on the grounds that Xiaomi and its Indian subsidiaries violated the provisions of India’s Foreign Exchange Management Act 1999 by illegally remitting money to foreign entities through royalty payments falsely claimed. In October 2023, the ED arrested four Vivo executives including one Chinese national working in India in a case of alleged money laundering. The allegation originated in July 2022, when the ED said it had raided 48 Vivo locations in India and blocked 119 bank accounts to freeze 4.65 billion rupees ($58.76 million) of assets under Vivo and its associates. A month after the ED’s actions, the Directorate General of Revenue Intelligence (DRI) announced accusation of evading Rs. 22.17 billion (about US$ 280 million) in tax payment. In December 2023, an Indian court released two executives working for Vivo’s India unit in a case of alleged money laundering, deciding the arrest was illegal due to procedure discrepancies during the arrest.

New Delhi has tightened regulation on investments from neighboring countries in 2020. Chinese smartphone manufacturers such as Xiaomi, OPPO, realme, and Vivo were asked by authorities to appoint Indian nationals as executives like CEO, chief operating officer (CPO), chief financial officer (CFO) and chief technical officer (CTO), the Economic Times, an Indian newspaper, reported in June 2023. These phone makers were also required to introduce Indian equity partners in their Indian businesses, appoint Indian contract manufacturers, increase local manufacturing down to the component level through joint ventures with local businesses, expand exports from the Southern Asian country and have local distributors, according to the report.

At the annual World Economic Forum meeting in Davos, Switzerland last month, Rajesh Kumar Singh, Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), said India could ease its scrutiny of Chinese investments if the two economies’ boarder remains stable as the situation of the border has stabilized. He didn’t give a timetable for a possible easing.  China always believes that China-India boundary question is a historic issue and should be placed and resolved appropriately in our bilateral relations, Mao Ning, the spokesperson of China’s Foreign Ministry, later commented. Mao said Beijing hopes India could fully recognize the win-win nature of China-India economic and trade cooperation, and provide a fair, just, transparent and nondiscriminatory business environment for Chinese companies investing and operating in India.Mao pointed out the two-way trade volume between China and India has exceeded USD 100 billion in recent consecutive years and kept rising annually.