【Text/Observer Network Lv Dong Editor/Zhou Yuanfang】
"Chinese mobile phone manufacturers are really having a hard time in India."
Last week, Honor CEO Zhao Ming admitted to the observer network and other media that due to well-known reasons, the Honor team has withdrawn from the Indian market, "our understanding of the Indian market is very clear."
At present, the glory of leaving Huawei is setting its sights on the global market and shouting out the goal of "overseas markets surpassing domestic market shipments in five years". But in the face of the Indian market with the same volume as the Chinese, why did Glory choose to withdraw? India's worrying business environment may be the main reason.
Honor product launch in India in 2015
In the past three months, Chinese companies such as Xiaomi, OPPO, and Vivo have been inspected by the Indian authorities for various reasons, and even some executives have been "tortured to extract confessions" by local law enforcement agencies. Statistics show that at least 500 Chinese-funded enterprises have encountered tax and compliance inspections in India in the past two years, and their operations have been greatly affected.
Are Chinese companies "targeted" in the Indian market? What are the underlying reasons behind this?
Liu Zongyi, a columnist on the Observer Network and an expert on India, pointed out that India is a member of the Group of Four (Quad) and recently joined the "Indo-Pacific Economic Framework", and its strategy of using the US "Indo-Pacific Strategy" to achieve economic rise and the rise of great powers by introducing capital and technology from Western countries such as the United States and Japan has gradually become clear.
Liu Zongyi believes that in this process, the Indian authorities use the local complex judicial environment to "selectively enforce the law" of Chinese enterprises, and its deep logic is that the International Capital of the United States, Japan and India's local monopoly chaebols are forming a joint force, hoping to form an alternative to China's industrial chain and supply chain, and seize the market share of Chinese enterprises in India.
Chinese enterprises that have been "cared for"
"Not only did companies like Glory finally choose to withdraw from the Indian market, but many small and medium-sized factories on the mainland that are located in important industrial chains such as Indian mobile phones have been dumped, and the remaining ones that have not closed down have also chosen to withdraw from the Indian market." Zhao Ming confessed at a new product launch last week.
He also added that companies such as OPPO, vivo, xiaomi and other companies that still insist on operating in India are also very unhappy in India for the same reason.
In recent years, the high growth rate of the Indian economy coupled with the huge population size has once attracted a large number of overseas companies to India to pan for gold, and Xiaomi is one of the earliest Chinese companies to open up the market in India.
After years of deep cultivation, Xiaomi not only overpowered Samsung, ranking first in the Indian mobile phone market shipments for four consecutive years, but also actively promoted the "Made in India" plan and set up factories in the local area. In 2017, when Lei Jun visited India, he was also cordially received by Indian Prime Minister Narendra Modi.
"This market was almost non-existent before the arrival of Chinese companies." Liu Zongyi analyzed, "OPPO, vivo, millet, Huawei, ZTE and other enterprises into India, in fact, to open up a piece of India's smart phone market, now Chinese companies make money, India's monopoly manufacturers look red, but lack of market competitiveness, all they can do is to squeeze out Chinese companies through various local influences." ”
Therefore, even if Lei Jun met Modi, he did not put a "talisman" on Xiaomi.
In 2017, Indian Prime Minister Narendra Modi met with Lei Jun, chairman of Xiaomi Group, who visited India
Since the end of last year, Indian government departments have raided Xiaomi India and even seized huge assets of The company on the grounds of tax evasion, false accounts and violations of the foreign exchange control law. Xiaomi India has also exposed that Indian law enforcement agencies use extreme threats when questioning the company's executives and family members to coerce them into confessing as required.
The tax problems encountered by Xiaomi are commonly used by the Indian government to target foreign companies. Post-mortem investigation showed that xiaomi's remittances to foreign countries to pay patent fees for various licensed technologies are a common practice of mobile phone companies.
OV has also had a similar experience with Xiaomi.
On July 13, the Revenue Intelligence Agency of India (IRIS) announced that OPPO had evaded tariffs of nearly 43.9 billion rupees (about 3.7 billion yuan) and did not include royalties paid when calculating the transaction value of imported goods, and the agency had issued a notice to OPPO India to pay taxes.
More than a week ago, the Indian Enforcement Agency raided 48 locations of Vivo India and 23 related companies on suspicion of violating the relevant provisions of India's Money Laundering Prevention Act (PMLA), and announced on July 10 that it had frozen 119 bank accounts related to Vivo India with assets worth Rs 465 crore (about 390 million yuan).
Earlier, in February, India's Revenue Service searched several of Huawei's offices in India, accusing it of allegedly avoiding taxes by inflating costs, suppressing low incomes, adjusting accounting rules, and possible loopholes in royalty fees; Chinese companies such as OnePlus and Foxconn have also been raided by the Indian Tax Bureau.
Chinese Internet companies were hit even earlier. Since June 2020, India has banned more than 300 China-related apps, including TikTok, WeChat (WeChat Overseas), UC Browser (UC Browser), Bigo Live (live broadcasting), SHAREit (Eggplant Express) and other popular video-sharing social or live streaming platforms, saying that these applications pose a threat to India's sovereignty, territorial integrity and security.
It can be seen that the enterprises that have been "cared for" in the Indian market are more concentrated in the fields of mobile phones, software and ICT, which Liu Zongyi believes is related to India's own emphasis on the development of the digital economy and new energy direction.
Liu Zongyi pointed out that at present, India still has a large trade deficit with China, a large number of imports of Chinese components and intermediate products, after processing and assembly in India, sold in India and the European and American markets, but in the past few years, some of China's mobile phones and white goods companies have indeed transferred a lot of industrial chains to India, even including some key links.
He believes that India is currently in the initial stage of industrialization, its industrial base is not as good as China, but in other developing countries, the conditions are better, the industrial categories are relatively complete, and its goal is to replace China's industrial chain through the combination of Western capital and technology with Indian manufacturing and market. The above-mentioned crackdown on Chinese electronics manufacturing enterprises and digital economy enterprises (such as TikTok) hopes to show the West on the one hand the determination of economic "de-Sinicization", on the other hand, its domestic monopoly consortium is taking the opportunity to seize the consumer electronics and digital economy market space opened by Chinese companies in India.
Extremely complex market environment
In the eyes of some Chinese operators, tax inspections in India are not uncommon. According to Chinese business people operating in India, India's tax-related laws and inspections have always been complex and stringent, and even many local Indian companies sometimes do not know their own taxes.
However, the inspection of many large Chinese companies still makes many Chinese companies nervous. People who have been operating in India for many years recently confided to the media that their company's bank account was frozen due to the "tax inspection incident", and it was fined 600 million yuan, which could only end in bankruptcy.
"The period when India's tax agencies are frequent, often the Period of Financial Constraints of the Indian Government, their last active period was about 10 years ago, when mobile phone brands such as Samsung and Nokia were 'cared for' by relevant agencies." Liu Lin, director of deloitte's South Asia regional Chinese enterprise service group, said at a meeting.
"The British heritage makes India's local legal system extremely complex, even unparalleled in the world," Liu Zongyi said, "India's judicial system is overwhelmed, there is a large backlog of cases every year, such a status quo has also objectively become an obstacle for Chinese companies in India to protect their rights and interests through legal weapons, once caught in lengthy litigation, even if the final victory in the lawsuit, will pay a huge cost, the market has long been divided." ”
"The impact on India's business environment and government credit is huge," Liu zongyi said, "and there have been many recent reports and analyses that Western companies are actually exiting India, not entering India." ”
Source: Reuters
Last month, the Indian Mobile Phone and Electronics Association sent a letter to the Indian government expressing dissatisfaction with the actions taken by Indian law enforcement against mobile phone manufacturers, saying it had caused "deep and unnecessary panic" in the industry.
In addition, Amazon was found to have concealed its tax aspects in June this year and was fined 2 billion rupees (about 170 million yuan), and many companies in Japan and South Korea are facing the same situation.
"I don't have any investment in India, they don't understand the economy at all." American investor Rogers once commented on the Indian market, saying that the Indian economy is worrying, the capital investment confidence index is low, and issued an order to the international market to "snipe the Indian economy".
Labor costs in India have long seemed cheap, but the country's manufacturing plants and functions are fraught with chaos and waste. Despite attracting a lot of foreign investment by relying on a huge market, it is undeniable that India is still one of the countries with the worst business environment in the world.
According to a World Bank report released in October 2017, India ranked 130th in the world for doing business. Among them, the ranking of several indicators such as handling construction permits, obtaining credit, protecting minority investors, starting a business and resolving bankruptcy continued to decline.
Liu Zongyi pointed out that on the one hand, India has not joined the RCEP at present, but has joined the "Indo-Pacific economic framework", behind the seemingly contradictory policies, is its ruling party "Indian People's Party" and the "Indian National Volunteer Service Group" behind the essentially conservative economic thinking, the ultimate goal is to achieve "Made in India", if it really develops in the future, they will also crowd out Western enterprises. On the other hand, in addition to monopoly consortia, there are also a large number of small and medium-sized enterprises in India, which are often closely linked to the Chinese economy, mainly through the processing of Chinese intermediate products to achieve survival and development, and absorb a large number of jobs in India. These companies, acting in their own interests, do not support the ruling party's "de-Sinicization" economic policy, and some Indian economists advocate embracing globalization and market laws, and they do not support the ruling party's economic policies.
These complex interest-based logics, together with loose Indian society, constitute India's extremely complex market environment.
Liu Zongyi finally suggested that since India's ruling People's Party is mainly supported by big business groups, its attitude toward China and economic policies cannot be easily changed, and If Chinese enterprises invest in India, they can pursue "short and fast", and long-term and strategic investment should be particularly cautious.
Attached: Recently, Chinese enterprises have been unfairly treated in the Indian market (according to public media reports)
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