China warns of chilling impact on business confidence shortly after India’s raid on Vivo

The Chinese embassy in India has issued a statement criticizing Indian authorities for “frequent investigations” into local units of Chinese firms and warning that such moves are “hindering the betterment of China.” [the] business environment” in India and “chills the confidence and willingness” of companies from other foreign nations to invest in and operate in the South Asian market following raids on Vivo offices earlier this week.

The Enforcement Directorate, India’s anti-money laundering agency, raided dozens of phone maker Vivo’s factories and manufacturing facilities in several states earlier this week. In a statement to TechCrunch, Vivo said it is working with Indian authorities.

Wang Xiaojian, spokesman for the Chinese Embassy in India, said China is closely following the issue.

The Enforcement Directorate said Thursday afternoon that a Vivo-affiliated firm used forged documents at the time of its incorporation in India. The agency seized 119 bank accounts holding $58.7 million linked to Vivo India, it added (PDF).

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The incident follows a similar investigation by Xiaomi, another Chinese company. The ED seized US$725 million from Xiaomi India, accusing the company of violating the country’s foreign exchange laws. Executives at Xiaomi, which has denied the allegations and legally challenged the verdict, have been threatened with “physical violence” during their investigation, Reuters previously reported.

According to research firm Counterpoint, Chinese smartphone makers dominate the Indian market. Xiaomi held the tentpole position in India in the quarter ended March, while Vivo was the fourth-largest smartphone vendor by volume of phones shipped, Counterpoint said.

The India Cellular and Electronics Association, a lobby group representing several tech giants including Apple and Amazon, urged New Delhi to step in in May, claiming ED had no understanding of how licensing fees worked in the tech industry. (The Indian Enforcement Directorate previously said Xiaomi transferred $725 million to three foreign-based companies “under the guise of royalties.”)

Tensions between the two nuclear-armed neighboring states escalated in 2020 after a border skirmish. India has since introduced several restrictions on Chinese firms (without ever naming China in its orders).

Over 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 changed its foreign direct investment policy in 2020 to require all neighboring countries with which it shares a border to obtain New Delhi’s approval for their future business in the country. Previously, only Pakistan and Bangladesh were subject to this requirement.

The investment rule has severely restricted Chinese investors’ ability to support Indian companies and start-ups. Before the change, Tencent and Alibaba were among the most prolific supporters of Indian startups.

Xiaojian said Wednesday night that the world’s largest population always urges Chinese companies to comply with laws and regulations abroad and “wish” the Indian side to provide Chinese companies with a “fair, just and non-discriminatory business environment.”

“The essence of Sino-India economic and trade cooperation is mutual benefit and win-win results. The bilateral trade volume between China and India will reach an all-time record of over US$100 billion in 2021, reflecting the huge potential and far-reaching prospects for economic and trade cooperation between our two countries. China wants the Indian side to investigate and enforce the law in accordance with laws and regulations and effectively provide a fair, just and non-discriminatory business environment for Chinese companies to invest and operate in India. ” he added.

The story has been updated with ED’s comment.