India has begun its second wave of cracking down on Chinese-owned technology, citing investigations by India’s Enforcement Directorate into dubious economic policies of Chinese technology as the reason. The agency, which is responsible for enforcing economic laws in India, has investigated three major Chinese smartphone makers in recent months. The bans on Chinese smartphone apps began in 2020, including short video social media platform TikTok. While Indian consumers adapted to this change well, it is predicted that the banning of additional brands like Xiaomi and Realme will lead to greater backlash from nationals.
The investigations have proved to be worthwhile as one investigation led to the seizing of Xiaomi Technology India Private Limited for $695 million in April. The company, a wholly-owned subsidiary of Beijing-based Xiaomi, was reported to have seized over 119 bank accounts that contained over $58 million belonging to Vivo India, a company owned by BBK Electronics of China. Further investigation a few days later revealed that Vivo’s sister company, Oppo, evaded $551 million in taxes.
Xiaomi’s long-time India head Manu Kumar Jain interpreted the investigations as harassment and was eventually relocated to Dubai after repeated attacks by financial crime-fighting authorities. In retaliation, the company has made accusations against the authorities of physical violence and coercion. As the probe has escalated, two of Vivo India’s Chinese executives have fled India through Nepal.
In an official letter drafted by Xiaomi executives to the Finance Minister and the Indian Cellular and Electronics Association, it was asserted that such maltreatment was unjustified. The letter also details that the accusation against Xiaomi for mishandling “royalty payments on intellectual property” is actually due to a misinterpretation of the function of smartphone royalty payments by investigators.
Previously, India has imposed bans on 59 Chinese apps amid a border conflict between the two countries that began almost two years ago. It has been reported that since then, India has extended the ban to more than 350 apps due to the “raging concerns” about the security of their data.
Although it has been proven that Indian consumers are able to adapt to living without Chinese apps such as TikTok and Shein, it is unlikely that the country’s dependence on Chinese smartphones will be as simple. The Indian market now represents the second-largest market for mobile phones after China, demonstrating the invaluable role affordable Chinese models have played in the rapid proliferation of smartphones in India.
Over 60% of smartphones sold in India are from Chinese brands Xiaomi, Realme, Vivo, and Oppo. Moreover, Realme, owned by BBK Electronics, retains four of the five most popular smartphone models in India. Mobile phone adoption has aided the growth of sectors such as e-commerce, fintech, and over the top media due to the rapid adoption of smartphones.
Additionally, these Chinese smartphone markets have created jobs in India. Among its many offices, factories, service centers, and stores in India, Xiaomi employs over 50,000 people. The optics of being tough on Chinese companies are beneficial, but frequent raids dampen the business climate, especially as India actively seeks to reduce dependence on imports of electronics.