The central theses:
- Xiaomi said last week that its operations in India were “effectively halted” after a court refused to release its $676 million worth of assets frozen in a local tax dispute
- Chinese smartphone makers have dominated the Indian market in recent years but are increasingly at odds with local authorities amid geopolitical tensions between Delhi and Beijing
By Jose Qian
It’s been a tough year for Chinese smartphone makers in India as they try to keep their heads above the tenuous political relationship between Beijing and Delhi.
The increasingly difficult environment is encapsulated in the market leader Xiaomi Corp. (1810.HK), which was involved in a dispute with India’s tax officials for much of the year that year. That row reached new heights last week when Xiaomi said an Indian court’s refusal to lift the freeze on its $676 million local assets had “effectively halted” its operations in the country.
India’s Enforcement Directorate (ED), its federal financial crimes agency, froze Xiaomi’s assets in April, accusing the company of making illegal remittances to foreign companies by disguising them as royalties. Xiaomi said over 84% of the assets seized by the ED corresponded to royalties paid to top US smartphone chipmakers Qualcomm QCOM.
While the dispute looks company-specific, it comes as Chinese tech companies face an increasingly hostile operating environment in the market. As Indian consumers embrace Chinese smartphones and other high-tech products, analysts say Delhi may worry about the rapid dominance of Chinese brands in its market. Delhi has also raised growing national security concerns about the safety of Chinese products, similar to those in the US
If those tensions rise, Chinese brands could see an uptick in the market in the years to come, with tighter scrutiny leading to more similar clashes.
Xiaomi has denied any wrongdoing in the tax dispute and challenged the ED’s asset freeze…
