After I-T Raids At Offices Of Smartphone Companies, Two Chinese Groups Say Probes Shake Confidence

While in a major crackdown on Chinese mobile manufacturers and distributors in India the Income Tax department has conducted raids on the offices and manufacturing units of such firms, a report claimed that two Chinese chambers of commerce in the country have reached out to the government to covey their concerns.

The Chinese Chamber of Commerce in India and the India China Mobile Phone Enterprise Association urged the centre to reform its irregular tax-investigation policy and treat international investors equally, as well as actively establish an open, fair and nondiscriminatory business environment for Chinese firms doing business in India, reported Chinese state-media, Global Times.

According to the report, the probe into Chinese businesses—including ZTE, Xiaomi, Oppo and OnePlus—has rocked the faith of a business group that has spent $3 billion and created 500,000 local employment in recent years.

These groups reportedly said in a statement that Chinese mobile phone firms in India are experiencing unprecedented difficulties, and they are unable to carry out routine manufacturing and operations as a result of unexpected inspections and fines by Indian authorities.

To protect local manufacturers from low-cost imports from China, India has levied anti-dumping duties on five Chinese products, including certain aluminium goods and other chemicals, for a period of five years.

According to separate notifications from the Central Board of Indirect Taxes and Customs, the duties have been imposed on certain flat-rolled aluminium products, sodium hydrosulphite (used in the dye industry), silicone sealant (used in the manufacturing of solar photovoltaic modules and thermal power applications), hydrofluorocarbon (HFC) component R-32 and hydrofluorocarbon blends (used in refrigerator industry).

However, Global Times reported that both the groups said in the statement: "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."

The Trust Issue

The report by Global Times claimed that according to some Chinese analysts the business environment in India is “harsh” and that is not only for Chinese firms but “all foreign companies."

Even though some companies like Amazon has been facing quite a hard time, as recently antitrust watchdog has suspended Amazon’s 2019 deal with Future Group and imposed a fine of about $26.3 million to the American e-commerce giant for concealing facts, according to official data, 78 foreign firms were registered in the country under the companies law in the previous financial year. A total of 124 foreign firms were registered in India in 2019-20 while the number was 18 in 2018-19.

Furthermore, in December, Masayoshi Son, the founder and CEO of SoftBank, claimed the Japanese company has invested $14 billion in India over the last decade, making it the country's largest foreign investor. While speaking at the Infinity Forum, he said: “Just this year alone, we have invested $3 billion into India. We are the biggest foreign investor in India. We are providers of about 10 per cent of the funding of all the unicorns--firms valued at $1 billion or more--in India.”

“I believe in the future of India. I believe in the passion of young entrepreneurs in India. There is a bright future. I tell the young people in India, let’s make it happen, I will support,” he added.

On the other hand, the Chinese government's crackdown on privately held businesses and individuals like Alibaba's Jack Ma and several other prominent personalities has caught the attention of the globe and alarmed many portfolio investors.

Additionally, Chinese tech firms are struggling to win the trust, mostly in the West due to data privacy concerns. Outside the Great Wall Of China, the quick rise of huge brands like TikTok and Xiaomi has raised concerns among the foreign governments regarding Chinese tech companies’ relations with authorities at home and how Beijing could use it for political propaganda.

Recently, due to national security concerns, the United States has blacklisted several Chinese tech companies. Additionally, a few months ago, after an examination revealed security weaknesses and censorship problems with specific smartphones, Lithuanian cybersecurity experts are encouraging the country's government entities to stop using Chinese smartphone manufacturers.

Although the latest investigation in India appears to have been motivated mostly by economic considerations, India is also aware of the threats. After banning several Chinese apps, in October this year, a report claimed that according to some sources, India is considering enacting legislation that would require an in-depth examination of handsets to guarantee that the devices and loaded apps are not spying on the residents of the country—where the smartphone market is dominated by Chinese players like Xiaomi, Oppo, Vivo and Realme.

One of the sources then said: “The government doesn’t want to scare companies but needs to ensure that there are no security-related issues. For the security teardown, the Chinese should not have a problem if they think their products are clean.”

Even though Chinese companies repeatedly denied that they share user data with Beijing, according to analysts, their explanation is being hampered by Chinese laws. Liz Liu, an assistant professor at Georgetown University, told South China Morning Post earlier this year: “Unfortunately, the challenge facing Chinese tech companies is not so much about their actual behaviour – whether they have indeed handed over foreign citizen data to the Chinese government – but about how to prove that they have not and will not.”