Indian law enforcement agencies recently accused Chinese technology company Xiaomi (India) of violating the foreign exchange management law and freezing its funds of about 55.5 billion rupees (about 4.8 billion yuan) on the grounds of illegal remittance payment of royalties to foreign entities According to a court document disclosed by Reuters on the 7th, Xiaomi (India) said that manu Kumar Jain, former general manager of the company, Samir Rao, chief financial officer and his family had been "threatened by physical violence and coercion" when questioned by Indian law enforcement agencies
The reporter of the Global Times asked Xiaomi about this. As of the early morning of the 9th, he had not received a reply.
Xiaomi (India) said in the material submitted to the court on May 4 that the investigators of Indian law enforcement agencies said at that time that if they did not submit the relevant statement as required, "they would face terrible consequences". Subsequently, Rao added in the statement "under extreme coercion" that "I acknowledge that Xiaomi Technology India Private Co., Ltd. has paid royalties in accordance with the instructions of some people of Xiaomi group". However, Rao withdrew the statement the next day (April 27) and said that "(I did not make the statement voluntarily but under coercion)".
New Delhi television said on the 7th that Indian law enforcement agencies denied that their investigators had "coerced" employees of Xiaomi (India) company. They said that the relevant allegations were "untrue and groundless". Xiaomi (India) voluntarily submitted the relevant statement in accordance with the Indian foreign exchange control law and in a favorable environment and occasion. "The statement is consistent with the written content and recording materials submitted to the law enforcement agencies". The law enforcement agency also stressed that "the agency is highly ethical and professional, and will not use coercion or threat against the employees of the enterprise involved at any time".
Anonymous sources told the global times that the action taken by Indian law enforcement agencies against Xiaomi (India) was neither isolated nor a sudden attack on a whim. According to him, the Indian Ministry of Finance and its subordinate tax, financial and other investigation institutions have already brought Chinese enterprises such as Xiaomi (India) into the "observation line of sight" to collect their "illegal evidence". In January this year, the Indian Ministry of Finance announced that it would recover taxes totaling about rs. 6.53 billion from Xiaomi (India) from April 2017 to June 2020, on the grounds that the patent license fees and royalties paid by Xiaomi (India) to Qualcomm and Beijing Xiaomi mobile software company were not included in the transaction value of the company's imported goods. In addition, the Indian government also investigated Xiaomi's (India's) compliance with the income tax law at the end of last year. The source believes that Xiaomi (India) is not the first Chinese funded enterprise in India to be investigated by the Indian authorities, and probably will not be the last in the short term.
According to the latest reports of Indian media on the incident, the high court of Karnataka temporarily shelved the capital freeze order issued by law enforcement agencies on Xiaomi (India), and the next round of hearing will be held on May 12. This means that Xiaomi (India) company has a breathing space and is still able to carry out daily corporate activities with bank account funds. A person familiar with the matter said that Xiaomi (India) could choose to disclose its capital transfer such as royalties to the Indian government to obtain a certain degree of exemption.
India is an important overseas market for Xiaomi. According to the data of market research institutions such as IDC, counterpoint and canalys, from 2018 to 2021, Xiaomi's smartphone market share in India was 28.9%, 28.6%, 26% and 24% respectively, basically stabilizing its position as the largest mobile phone brand in India. In addition to Xiaomi, Chinese brands with the highest share of smartphone market in India include vivo, realme and oppo. The above four Chinese companies accounted for about 65% of the shipments of the Indian mobile phone market last year, completely "hanging" Indian local brands such as micromax, lava and karbonn, and the negative effect of "building a big tree to attract the wind" in business began to appear.
After the Sino Indian "galawan Valley conflict" in 2020, this negative effect will be further amplified. The Indian government began to think about how to reduce its dependence on China's imports, and took the opportunity to support local enterprises to help India replace China as a new global manufacturing center. Since then, such as banning more than 200 Chinese mobile phone applications and conducting "legal compliance investigation" on Chinese funded enterprises and personnel in India are also brewed and implemented under such policy logic.
A Chinese who has been engaged in business and trade in India for a long time and has now returned to China told the Global Times: "so many foreign businessmen in India are both Chinese and people from other countries, and India's various tax laws are so complex, (we) are likely to be careless and exceed the rules. Of course, it does not rule out that some people or enterprises deliberately evade or even violate Indian laws", "In the context of the decline of China India relations, any behavior of us in India will be examined by the Indian government and law enforcement departments with a magnifying glass.". As one of the "victims" of the Indian government's law enforcement actions against Chinese businessmen in India in 2020, he said: "I believe that India's action against Xiaomi, like previous similar investigations, is not purely motivated by the maintenance of trade or commercial fairness, but the reality of administrative kidnapping in the name of law, so that they can have better chips in negotiations with China."
Special correspondent / Hu Bobo