China’s embassy in India has criticized Indian authorities in a statement for “frequent investigations” into local units of Chinese firms and warned that such moves “impede the improvement of [the] business environment” in India and “chills the confidence and willingness” of other foreign nation’s businesses to invest and operate in the South Asian market following raids into Vivo offices earlier this week.
The Enforcement Directorate, India’s anti-money laundering agency, earlier this week raided dozens of phone-maker Vivo’s operations and production sites across multiple states. In a statement to TechCrunch, Vivo said it was cooperating with Indian authorities.
Wang Xiaojian, spokesperson of Chinese Embassy in India Counsellor said China was following the issue closely.
The Enforcement Directorate said Thursday afternoon that a firm associated with Vivo used forged documentation at the time of incorporation in India. The agency seized 119 bank accounts with $58.7 million linked with Vivo India, it added (PDF).
ED has carried out searches at 48 locations across the country belonging to VIVO Mobiles India Pvt. Ltd. and its 23 associated companies, and seized balance of Rs. 465 Crore lying in 119 bank accounts, including FDs of 66 Crore of Vivo India, 2kg gold bars, and Rs. 73 Lakh cash.
— ED (@dir_ed) July 7, 2022
The incident follows a similar investigation into Xiaomi, another Chinese firm. The ED seized $725 million from Xiaomi India, accusing the company of violating the country’s foreign exchange laws. Executives of Xiaomi, which has refuted the charges and has legally challenged the ruling, faced threats of “physical violence” during their investigation, Reuters reported earlier.
Chinese smartphone makers command the Indian market, according to research firm Counterpoint. Xiaomi held the tentpole position in the India in the quarter that ended in March, whereas Vivo was the fourth-largest smartphone vendor by the volume of handsets shipped, Counterpoint said.
India Cellular and Electronics Association, a lobby group that represents several tech giants including Apple and Amazon, in May urged New Delhi to intervene and alleged ED of lacking understanding of just how royalty payments worked in the tech industry. (The Indian Enforcement Directorate said earlier that Xiaomi had remitted $725 million to three foreign-based entities “in the guise of royalty” payments.)
Tension between the two nuclear-armed neighboring nations escalated in 2020 after a skirmish at the border. India has since introduced several restrictions on Chinese firms (without ever naming China in its orders.)
In the past two years, New Delhi has banned hundreds of Chinese apps including TikTok, UC Browser and PUBG Mobile, citing national security concerns. India also amended its foreign direct investment policy in 2020 to require all neighboring nations with which it shares a boundary to seek approval from New Delhi for their future deals in the country. Previously, only Pakistan and Bangladesh were subjected to this requirement.
The investment rule has significantly curtailed Chinese investors’ ability to back Indian businesses and startups. Prior to the amendment, Tencent and Alibaba were among the most prolific backers of Indian startups.
Xiaojian said Wednesday evening that the world’s largest population always asks Chinese firms to follow laws and regulations overseas and “wishes” that the Indian side provides a “fair, just and non-discriminatory business environment” to Chinese firms.
“The essence of China-India economic and trade cooperation is for mutual benefit and win-win results. The bilateral trade volume between China and India strikes a historical record of over 100 billion USD in 2021, which reflects the huge potential and broad prospect of economic and trade cooperation between our two countries. China wishes the Indian side to investigate and enforce the law in compliance with laws and regulations, and effectively provide a fair, just and non-discriminatory business environment for Chinese enterprises to invest and operate in India,” he added.
The story was updated with ED’s comment.
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