More Trouble For Chinese Companies As India Tightens Scrutiny

Several Chinese business entities have come under the scrutiny of authorities in India with Vivo and ZTE becoming the latest to join the list for their alleged financial irregularities.

India is probing 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 that indicates potential violation including fraud, Bloomberg reported on Monday.

In the case of Vivo, an inquiry was sought in April to detect if there were “significant irregularities in ownership and financial reporting” while authorities were asked to study the books of ZTE and submit findings “on urgent basis."

The ministry of corporate affairs has also started the process of inspecting books of accounts of more than 500 Chinese companies, Bloomberg reported quoting a person with knowledge of the matter.

Apart from ZTE and Vivo, this includes Xiaomi, Oppo, Huawei Technologies, Alibaba.com India E-commerce Pvt. Ltd., etc.

Not the first time for China-based companies, and perhaps not the last:

The China-based firms have been under the radar of Indian authorities since 2020, when the two nations were embroiled in a border dispute in Galwan Valley in Ladakh.

Few weeks ago, Xiaomi India came under the scrutiny for financial irregularities.

The Enforcement Directorate (ED) froze Xiaomi's accounts with over Rs 5,500 crore on April 29 alleging that it has violated the Foreign Exchange Management Act (FEMA) by illegally transferring money abroad to three companies under the guise of royalty payments.

The company, however, has denied the allegations and claimed its royalty payments and statements to the bank are legitimate. Xiaomi said the royalty payments were for licensed technologies and IPs.

Later, the Karnataka High Court extended the stay till June 1 on the ED order of freezing Rs 5,551 crore in the bank accounts of Xiaomi India.

In April, Manu Kumar Jain, the global vice-president of Xiaomi appeared before ED in connection with a probe linked to alleged contravention of the foreign exchange law. Jain’s statement had been recorded at the agency’s Bengaluru office.

The country's tightened scrutiny has also deepened the doubts about Huawei and ZTE’s participation in 5G business.

As per reports, Chinese telecom vendor Huawei's founder was allegedly involved with the People’s Liberation Army's (PLA) engineering corp. However, the company has maintained that there are no links with the Chinese Army.

More than a dozen Chinese loan apps targeting the low-income categories have come under the scanner of Indian security agencies. According to officials, these loan apps transfer the data to their partners in China which can be further misused, Economic Times reported.

The Ministry of Home Affairs in February recommended a ban on 54 more Chinese mobile applications, including the popular game Garena Free Fire.

In 2020, the government had also banned TikTok, mobile game PUBG and other popular apps from China, including Shareit, Shein, Xiaomi Mi Community, Clash of Kings, Weibo, Likee, etc, citing threat to national security and sovereignty.