China dominates India’s huge smartphone market that witnessed a sale of over 150 million mobile phones in 2020 alone. According to Counterpoint Research, smartphone shipments were expected to reach 173 million in India in 2021. In the July-September 2020 quarter, Chinese brands captured 74 per cent of the Indian smartphone market. Xiaomi alone accounted for 22 per cent of the shipment share. India’s smartphone market just keeps getting bigger because of its young population demographics, increasing incomes and a craze for using smartphones.
In light of such statistics, it becomes contingent upon the Government of India to protect the nation’s interests. Chinese smartphones pose a direct threat to India’s national security, and therefore, their sale must be curtailed. In fact, the BJP-led government of Prime Minister Narendra Modi is finding it very easy to take action against Chinese smartphone companies. How so, you might wonder? Well, all Chinese companies in India seem to be breaking the country’s laws. Therefore, it is becoming a walk in the park for the Modi government to decimate them.
Chinese Smartphone Companies in Big Trouble
According to a report by Bloomberg, the Modi government has initiated action against the local units of ZTE Corp. and Vivo Mobile Communications Co. for alleged financial improprieties. The Ministry of Corporate Affairs will scrutinize auditor reports and has received information from unnamed sources that indicates potential violations including fraud.
The report added that in the case of Vivo, an inquiry was sought in April to detect if there were “significant irregularities in ownership and financial reporting.” When it comes to ZTE, authorities were asked to study the Chinese company’s books and submit findings “on urgent basis.”
Action against ZTE and Vivo comes as part of a wide-ranging crackdown on Chinese smartphone companies in India. The Ministry of Corporate Affairs has started the process of inspecting books of accounts of more than 500 Chinese companies. According to sources quoted by Bloomberg, the crackdown is being undertaken against Xiaomi, Oppo, Huawei Technologies, several Indian units of Alibaba Group such as Alibaba.com, India E-commerce Pvt. Ltd., and Alibaba Cloud (India) LLP.
The Nirmala Sitharaman-led ministry has already sent letters to some firms seeking details on directors, shareholders of the companies, ultimate beneficiaries and owners, while it is in the process of seeking similar details from the rest of the companies.
Past Action Against Chinese Companies
ZTE is no novice to action against it being taken by Indian authorities. In 2021, raids were conducted against ZTE Corp which revealed the company’s tax debt of several hundreds of crore rupees. ZTE was found in possession of unaccounted money, and was also caught for its inability to deduct tax at sources for several years.
In February this year, the IT department revealed that Huawei attempted to dodge taxes in India for several years by falsifying its accounts. Meanwhile, Oppo and Xiaomi were held accountable for their illegal activities last year. Both companies were found violating the IT Act of 1961 for the disclosure of transactions with associated enterprises.
Xiaomi Penalised
In April this year, the Enforcement Directorate (ED) announced it had seized more than ₹ 5,500 crores in assets from the Indian subsidiary of Chinese smartphone maker Xiaomi. As it turns out, Xiaomi India has been paying illegal remittances to its Chinese masters for the past several years, while brazenly flouting Indian foreign exchange laws (FEMA). The company has remitted foreign currency equivalent to ₹5,551.27 crores to three foreign-based entities which include one Xiaomi group entity, in the guise of royalty.
The Central Government led by Prime Minister Narendra Modi is not a very big fan of Xiaomi. In January this year, the Union Ministry of Finance had said that Xiaomi India was evading customs duty by way of undervaluation, as a result of which an investigation was initiated by the Directorate of Revenue Intelligence (DRI) against Xiaomi India and its contract manufacturers.
Chinese smartphones do have lower prices. However, the lower prices are enabled by bloatware, which is a system of pre-installed apps on a smartphone. If you purchase such a mobile handset, you cannot uninstall or even disable such pre-installed apps without compromising on the functionality of your smartphone or exposing it to serious security risks.
Read more: Chinese mobile giants in India are going to face a tough time!
Separately, such companies are flagrantly violating Indian laws and engaging in illegal, corrupt practices. The Modi government is in no mood to tolerate China’s utter disregard for India’s laws. Therefore, to teach Chinese companies a lesson, the Indian government is going hammer and tongs against smartphone makers who owe their allegiances to the Chinese Communist Party while operating on Indian soil.
