China On Vivo Raids: India’s Frequent Investigations Damaging Companies’ Goodwill

After the Enforcement Directorate (ED) intensified its investigation into the Chinese smartphone maker Vivo over allegations of money laundering, China responded by stating that the frequent investigation by India is damaging the goodwill of the companies in question.

The spokesperson of the Chinese Embassy in India, Wang Xiaojian said on Wednesday, “The frequent investigation of Chinese companies by the Indian side disrupts the normal business activities of the companies and damages the goodwill of the companies.”

The comments from the Chinese embassy come as Zhengshen Ou and Zhang Jie, two Chinese nationals working as directors at Vivo India, have fled the country in the face of ED’s investigation into Vivo.

On Tuesday, the ED conducted searches at 44 locations across the country, after taking cognisance of an FIR that alleged that some Chinese stakeholders in Vivo forged their identity documents.

Chinese officials had also expressed hope that India will lead the investigations into Vivo in accordance with applicable laws and regulations on Wednesday itself. China also said that it hoped that India would provide a ‘truly fair’ and ‘non-discriminatory’ business environment for Chinese companies.

A Vivo spokesperson had told Inc42 that it is cooperating with the authorities. However, the directors leaving the country casts doubts on the company. However, an ED official had told ANI that Ou and Jie had left the country last year.

Chinese Foreign Ministry spokesperson Zhao Lijian spoke in a similar line. “As I have stressed many times, the Chinese government always asks Chinese companies to abide by laws and regulations when doing business overseas,” Lijian said.

It is prudent to note here that the Ministry of Corporate Affairs had asked for a probe in Vivo in April 2022. The ministry has conducted investigations in more than 700 companies over the last few months over financial irregularities.

Vivo remains India’s fourth-largest smartphone seller, shipping around 5.7 Mn units in Q1 2022, behind the likes of Xiaomi, Samsung and Realme and ahead of the likes of Apple, Oppo and OnePlus.

Chinese smartphone makers have a majority stake in India’s smartphone market, with a 62% stake belonging to four Chinese brands – Xiaomi, Realme, Vivo and Oppo – according to a Counterpoint report.

However, three of the four largest smartphone makers in the country are under the government’s radar on allegations of financial irregularities.

In December last year, the Income Tax Department conducted searches at the offices of Xiaomi, Oppo and OnePlus, on suspicions of tax evasion. The department had alleged that Xiaomi had a tax liability of upwards of INR 600 Cr.

Earlier this year, Xiaomi saw some of its bank accounts seized by ED holding INR 5551.27 Cr, citing provisions of the Foreign Exchange Management Act (FEMA), 1999. The Chinese smartphone maker filed a petition against ED alleging rough treatment of its executives.