India is cracking down on Chinese phone makers

India has stepped up its crackdown on Chinese companies that dominate the smartphone market, with a series of legal measures that have raised trade tensions between Asia’s two largest countries.
Regulators in India this week accused Oppo, which sells popular Realme and its namesake brand, of tax evasion. This came in the wake of raids, lawsuits and the confiscation of extensive assets targeting the two companies, “Xiaomi” and “Vivo”. Together, the three Chinese tech groups control about 60 percent of India’s smartphone market.
The pressure on Chinese smartphone brands comes at a time when New Delhi is trying to build up its domestic technology sector and reduce dependence on imports, and comes against the backdrop of frosty relations between the two nuclear-armed neighbors and a border dispute between them.
India insists legal cases against Chinese companies are not politically motivated, but the raids have raised long-standing concerns about the foreign investment climate in the country.
Ashutosh Sharma, research director at market research firm Forrester, notes that cross-border tensions have caused India to step up scrutiny of Chinese-owned companies. “The level of mistrust is very high between India and China, and I don’t think there is any possibility that these companies are not being closely monitored by the government,” he said.
According to India’s Revenue Intelligence Directorate, a financial enforcement agency, BBK Electronics’ OPO, along with Vivo, evaded taxes to the tune of 43.9 billion rupees ($550 million).
The department says Obo got lower rates by misdeclaring imported items and not including other charges. The Revenue Authority is asking OPPO to pay the full amount. The company did not respond to a request for comment.
Vivo was raided at 48 locations and assets worth $60 million were confiscated last week. In response, the Chinese embassy in India complained that “repeated investigations by the Indian side into Chinese companies” were disrupting their business operations. Vivo said it was cooperating with the authorities.
This year, India’s financial enforcement authorities accused Xiaomi, the Chinese conglomerate that is a leader in the sale of smartphones in the Indian market, of illegally transferring $725 million abroad. Xiaomi has denied any wrongdoing.
“It was expected that Chinese companies would be targeted over time,” said Jabin T Jacob, an assistant professor at Shiv Nadar University in New Delhi who specializes in China. “The longer the border confrontation continues, the more Chinese companies are at risk. .” He added that the improbable allegations made by the enforcement authorities appear to be baseless.
Along with South Korea’s Samsung, Chinese handset makers have taken market share from popular Indian phone brands by using the latest technology while offering cheaper prices, undermining Indian companies.
Sharma added that the dominance of Chinese smartphone makers is “a big concern for the Indian government. That’s why ‘Made in India’ is being promoted,” referring to a government scheme to stimulate domestic manufacturing, part of New Delhi’s plan to reduce dependence on Chinese imports.
Most of the Chinese phone manufacturers make the devices in India and invest heavily in factories.
India’s Information Technology Minister Rajiv Chander Isekhar has denied that India discriminates against Chinese companies.
“Our view on companies is not driven by whether they are Chinese or not,” he told reporters, adding: “There are laws and there are rules that you have to abide by, and there is no free pass for anyone, whether you now is. Chinese or anyone else.”
India had already openly shown its unfriendly attitude towards Chinese companies when it restricted direct investment from neighboring countries in April 2020, when the coronavirus pandemic weakened Indian companies and made them vulnerable to takeovers.
Commercial hostilities escalated after bloody border clashes broke out between Indian and Chinese soldiers in the summer of 2020. India then banned hundreds of Chinese-owned apps, including TikTok, citing national security concerns.
Underscoring the complexity of trade relations between the two countries, Somaya Boumik, fellow at the Observer Research Foundation in New Delhi, found that Chinese investment in Indian start-ups, after declining in 2020, hit a three-year high reached in 2021. , and that Chinese funding is very strong in the startup ecosystem. Alibaba and Tencent are among the biggest supporters.
Bilateral trade between India and China grew in China’s favor – India imported $27.7 billion from China in the first three months of 2022, but exported only $4.9 billion to China. Electronics, chemicals and auto parts accounted for the bulk of China’s imports.
However, strategic sectors remain off limits. New Delhi does not want telecom companies to use equipment made by China’s Huawei, and this week it expanded the regulatory framework for approving the use of the devices. Huawei also faces tax investigations, but has said it is “fully compliant” with Indian laws and cooperating with authorities.
Jacob, of Shiv Nadar University in New Delhi, argued that keeping Chinese companies out of telecoms networks encouraged local players to invest “because they are at least assured of unmatched returns from elsewhere”. “In many ways, Indians are following the Chinese rules of the game” by “developing their own national heroes,” he added.

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