Xiaomi News: EXPLAINER-China’s Xiaomi Fights Probes In India’s Key Market

The Chinese smartphone giant Xiaomi Corp faces legal problems India as a federal financial crime agency and tax authorities investigate its business practices.

Xiaomi denies wrongdoing. But it recently made headlines with allegations that its executives have been intimidated by Indian law enforcement, attracting public rebuttals from the agency and words of support from China.

Here are the details of the tussle in one of Xiaomi’s key markets:

WHAT IS THE CASE ROYALTY ABOUT?

The Indian agency for the fight against financial crime, the Enforcement Directorate, has been investigating Xiaomi since February. On April 30, the agency said the smartphone maker had illegally transferred overseas funds to three entities, including one from a Xiaomi group entity, “royalty payments.”

It seized $ 725 million from Xiaomi’s local bank accounts, although an Indian court suspended that decision following a legal appeal by Xiaomi.

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The Chinese company claims that its payments were all legitimate and involved “licensed technologies and IPs” used in its Indian products.

In its court documents, Xiaomi claims that such payments were made to companies including US chip giant Qualcomm Inc and that relevant information was disclosed to Indian authorities.

THREATS OF “PHYSICAL VIOLENCE”.

Xiaomi’s Indian court filing revealed that the company had accused its senior executives of facing threats of “physical violence” and coercion from the enforcement management.

The company said Indian agents repeatedly questioned Xiaomi’s global vice president and former head of India, Manu Kumar Jain, as well as current Chief Financial Officer Sameer BS Rao, and warned them of the “dire consequences” if not had submitted statements as desired by the agency.

The Reuters report revealing those allegations sparked a response from the federal agency, which called Xiaomi’s allegations “false and unsubstantiated” and said the executives had been deposited “voluntarily in the most favorable environment”.

The Chinese Foreign Ministry in Beijing also reacted, calling on New Delhi to investigate compliance with the laws and ensure that Chinese companies are not discriminated against.

OTHER TAX INVESTIGATIONS, CHINA CONTROL

Chinese companies have been struggling to do business in India since 2020, when a border clash between the two nations occurred. India cited security concerns in banning more than 300 Chinese apps since then, including popular ones, such as TikTok, and tightened the rules for Chinese companies investing in India.

Xiaomi’s offices and manufacturing units in India were raided in December in an ongoing separate investigation into alleged income tax evasion.

And in another case in January, the Indian Revenue Intelligence wing asked Xiaomi to pay $ 84.5 million for allegedly evading some import taxes.

Xiaomi expressed concern in its latest filing in court against the direction of the application, stating that the agency’s action “creates an atmosphere of distrust and the country’s image suffers in international circles”.

KEY MARKET OF INDIA FOR XIAOMI

Xiaomi also sells other tech gadgets, including smart watches and televisions, and has a lot going on in the Indian market.

The company is best known for its affordable smartphone price range which has helped it grow rapidly in India. In March, the company told analysts it had held “position # 1 in India for 17 consecutive quarters.”

Its market share quadrupled from just 6% in 2016 to 24% last year, making it the Indian market leader, according to Counterpoint Research.

The company has 1,500 employees in India and provides a source of income for at least 52,000 workers employed by its third-party manufacturers, it said in its judicial filing.