Xiaomi’s fight against New Delhi’s decision to freeze its funds is set to continue, amid ongoing geopolitical tensions
- Xiaomi had around US$670 million of funds frozen in India last year amid investigation into overseas payments
- India’s financial crime agency has accused Xiaomi of making illegal remittances to foreign entities and passing them off as royalties
Chinese smartphone maker Xiaomi is set to continue its legal fight in India over New Delhi’s decision to freeze around US$670 million of funds, according to a person familiar with the situation, extending a battle that has become a cautionary tale for Chinese businesses that enter the country.
In the latest development, India’s Enforcement Directorate has issued notices to Xiaomi and its bankers, including Deutsche Bank, HSBC and Citigroup, over alleged illegal remittances made by Xiaomi, according to a Reuters report last week.
India’s financial crime agency alleges Xiaomi’s local unit made illegal remittances to foreign entities by passing them off as royalty payments, with banks allegedly handling these remittances without obtaining the necessary documentation, according to the Reuters report.
When reached by the Post on Wednesday, Xiaomi pointed to a statement issued by Xiaomi India on Twitter last October, which said it will continue to use all means to protect its reputation and the interests of shareholders while remaining committed to working with various authorities to resolve the issue.
Xiaomi’s India challenges mount with plunging sales and frozen assets
A person familiar with the situation at Beijing-based Xiaomi, who declined to be named as they are not authorised to talk to media, said no notice has been received and they will continue their fight to unfreeze India accounts.
Xiaomi had about US$670 million of funds frozen at local banks in India last year and has asked for this to be undone. Its application was rejected by an Indian High Court in April.
Xiaomi is not the only Chinese company facing regulatory scrutiny in India with accounts at Vivo, another Chinese smartphone player, also frozen last July. However, a Delhi High Court later lifted the freeze on Vivo’s accounts.
The about-turn for Xiaomi in India has been a red flag for other Chinese firms hoping to prosper in the South Asian market. After early commercial success, sentiment soured for many Chinese businesses following a border clash between the two Asian giants in the Himalayas in the summer of 2020.
Once the top smartphone brand in India for five straight years, Xiaomi ranked only fourth in the first quarter of 2023 after Samsung Electronics, and Chinese brands Oppo and Vivo, with only 16.4 per cent of the market, according to the latest figures from industry research firm IDC.
The Chinese government has not commented publicly on Xiaomi’s dispute in India, although the case has triggered anger among some Chinese netizens.
“If India really confiscates Xiaomi funds, most foreign-funded businesses may have to leave the country,” one user commented on China’s financial portal Sina.com.
“China should make a law banning its businesses from investing in India,” another user named Summer Wind commented on the site.
