Recent developments in India have resulted in legal concerns for Xiaomi, a smartphone manufacturer. The Chinese company’s assets, worth millions of dollars, were seized by Indian authorities on suspicion of making illegal payments to three groups outside India. According to the charges, one Xiaomi group organization pretended to be royalty.
Xiaomi denies reports of moving operations to Pakistan
Before this incident, Xiaomi was involved in a dispute with India’s Enforcement Directorate (ED), Income Tax Department, and Customs Department over allegations of tax cheating.
Xiaomi has denied these charges in court; yet, just one day after the court judgment, a new rumor surfaced on the internet saying that Xiaomi is considering transferring its operations from India to Pakistan to avoid additional legal difficulties. This rumor surfaced only a day following the court order.
The Chinese brand has openly rejected these accusations, claiming in a statement that they are “completely incorrect and unfounded.” An excerpt from the statement follows:
Xiaomi entered India in 2014 & in less than a year, we embarked on our Make in India journey. 99 percent of our smartphones & 100 percent of our TVs are made in India. We’ll take all measures to protect our reputation from false & inaccurate claims.
Xiaomi not getting relief from India court in asset freeze case
Despite Xiaomi Corp.’s claim that the enforcement action has “basically ceased” its activities in its critical Indian market, an Indian court refused on Thursday to lift a hold on the company’s assets, which were valued at 676 million US dollars.
The Enforcement Directorate, India’s government financial crime department, froze 55.51 billion rupees in Xiaomi assets in April on the grounds that the company had allegedly made illegal remittances to overseas entities while disguising them as royalties payments. The seizure was confirmed by an appellate authority the week before.
To be clear, Xiaomi devices are available in Pakistan; however, the company does not have a physical presence in the nation as it does in India; instead, it has partnered with Pakistani wholesalers to market its products. Given that India’s smartphone and other consumer goods market is substantially larger than Pakistan’s, it makes perfect sense for Xiaomi to prioritize India over all other regions.
Political concerns resulting from a border conflict in 2020 have made it difficult for many Chinese businesses to do business in India. Since then, India has cited security concerns as the rationale for banning over 300 Chinese apps, including popular ones like TikTok, and has tightened criteria for Chinese firms investing in India. TikTok was among the apps that were blocked. On the other hand, it is worth noting that Xiaomi has begun producing smartphones in Pakistan at a higher rate than in the past.