The last few years have not been good for companies investing in China. Regulatory bullying by the Chinese government is making it extremely difficult for local as well as foreign investors to sustain themselves in the communist country. As a result of this, they are now eyeing Indian markets.
Xi Jinping’s crackdown forces Chinese investors to look towards India
Currently, Chinese companies are facing a lot of regulatory issues in their own countries. From crypto miners to mobile company owners, the Communist party is repressing almost every industry.
Looking at their dwindling prospects in their own countries, Chinese investors are now eyeing India, the second-biggest consumer market in the world. Chinese products have been popular in India due to their low prices. It’s a tried and tested place for them to enhance their profiteering motives.
Chinese bodies urge India
Chinese business bodies are now urging the Indian government to relax regulatory norms for them. Two China-based trade bodies have sent a fresh proposal to India in this regard. They have asked the Indian government to change, which according to them is ‘irregular tax probe practice’.
According to them, if the Indian government accepts their demand, then it will create an open, fair, and non-discriminatory business environment for Chinese enterprises operating in India. Additionally, they said that a certain business group that invested $3billion and created more than 500,000 jobs do not feel confident for their future.
India is keeping a strict vigil on Chinese investments
The two trading bodies which put forward these demands are named as Chinese Chamber of Commerce in India, and the India China Mobile Phone Enterprise Association. In a statement sent to Global Times, the Chinese communist party’s mouthpiece, both bodies jointly said that Chinese mobile companies are facing sudden difficulties due to tax probe. Indian tax probe has resulted in day-to-day operational difficulties for companies facing these investigations.
The joint statement read, “Their confidence in developing in India is shaken. These practices are not conducive to India’s initiative on investment promotion and international economic and trade cooperation,”
Chinese companies were evading tax in India
The recent appeal by Chinese bodies was an aftermath of Indian regulatory bodies tightening their noose on Chinese mobile manufacturers in India. Companies like Oppo, Xiaomi, and Oneplus are facing allegations of massive tax fraud in India.
One week ago, a nationwide search operation by the Income-tax department was launched. The department conducted its operations on the premises of the above-mentioned Chinese mobile giants. These premises include factories, godowns, offices, and the residences of senior executives of the companies.
Raids on dealers as well as company’s premises
More than 20 such places were raided in National Capital Region, Mumbai, Rajkot, and Karnataka. The tax department also raided major dealers handling the distribution of these mobile phones in India.
The full details of the investigations are still awaited. However, in a statement, the I-T department confirmed that a heavy fine could be imposed especially on Xiaomi and Oppo. Both companies might be slapped with fines of over Rs 1,000 crore for not following the regulatory mandate prescribed under the Income-tax Act. The brands are not complying with the rules for disclosure of transactions with associated enterprises.
Chinese companies’ have to mend their ways
Chinese companies are facing a double whammy. On one hand, their own government’s policies are squeezing them dry; while on other hand Indian authorities have made it clear that abnormal and illegal business activities will not be allowed in India.
After China, India is the only option left for these companies. In fact, Chinese mobiles are infamous in India for their low prices and short shelf-life. If the I-T department act decisively on penalising them, it would mean that they were selling cheap products to the consumer on the back of tax fraud. Basically, they were cheating both consumers and the government.
Full details are still to emerge in the public domain. However, one thing is clear from these raids and appeals by Chinese bodies. The Indian government has made massive strides in its Aatmanirbhar Bharat. Our consumer spending is set to increase by leaps and bounds in the coming decades. Any company investing in India will have to follow law of the land.