Xiaomi Expresses Concerns Over Scrutiny of Chinese Companies in India

Chinese smartphone giant Xiaomi has conveyed to India the hesitancy among smartphone component suppliers to establish operations in the country amidst heightened scrutiny of Chinese companies by the government, Reuters news report said.
Xiaomi IndonesiaXiaomi, one of the top smartphone suppliers in India with a market share of 18 percent, has highlighted its concern in a letter dated February 6. In the letter, Xiaomi urged India Government to consider offering manufacturing incentives and reducing import tariffs for specific smartphone components. India will be heading for an election within 3-4 months.

Xiaomi has turned around its India business in financial year 2022 with the company’s turnover growing more than 9 percent to Rs 39,099 crore, according to a news report in a leading business daily.

The Chinese company currently assembles smartphones in India using primarily local components, with the remainder imported from China and elsewhere. The letter serves as Xiaomi’s response to a query from India’s information technology ministry regarding how New Delhi can further develop the country’s component manufacturing sector.

India’s intensified scrutiny of Chinese businesses follows a 2020 border clash between the two countries, resulting in casualties on both sides and disrupting investment plans of major Chinese firms. While Chinese companies operating in India generally refrain from publicly discussing the scrutiny, Xiaomi’s letter underscores their ongoing struggles in India, particularly in the smartphone sector where numerous critical components originate from Chinese suppliers.

In the communication, Xiaomi India President Muralikrishnan B. emphasized the necessity for confidence-building measures to incentivize component suppliers to establish local operations. Muralikrishnan noted apprehensions among suppliers regarding setting up operations in India, citing challenges faced by companies in the country, especially those of Chinese origin.

The letter highlighted concerns related to compliance and visa issues, urging the government to address them to instill confidence among foreign component suppliers. Xiaomi and the IT ministry did not respond to requests for further information and comment.

In addition to regulatory scrutiny, India has taken action against Chinese companies over alleged breaches of visa rules and illegal remittances. The government has frozen assets of over $600 million belonging to Xiaomi for alleged unauthorized remittances to foreign entities. However, both Chinese companies deny any wrongdoing.

Apart from regulatory measures, India has banned over 300 Chinese apps and halted planned projects by Chinese automakers since 2020. Executives of Chinese electronics companies also encounter difficulties obtaining visas to enter India, while their companies face delays in investment clearances due to heightened scrutiny.

Xiaomi’s letter also advocated for further reduction of India’s import tariffs, following New Delhi’s recent move to lower import taxes on specific smartphone components. The company proposed reducing tariffs on sub-components used in batteries, USB cables, and phone covers, aiming to enhance India’s manufacturing competitiveness.

This development coincides with India’s indication of a potential easing of scrutiny on Chinese investments, contingent upon peaceful border relations between the two countries, as suggested by India’s top industrial policy bureaucrat in January.