Today brings you a very infuriating news, that is, our national mobile phone brand Xiaomi encountered an unprecedented pig killing plate in India, and the company's assets of 680 million US dollars were frozen by the Indian court! This is Xiaomi's hard-earned money in the Indian market for almost ten years! What's going on here?
- The reason why the assets were frozen
According to Reuters and other media reports, the reason given by the Indian court is that Xiaomi's Indian company is suspected of violating India's "Foreign Exchange Management Act" because it has illegally remitted money to overseas institutions, while seizing the company's assets of about 4.8 billion yuan! What is this situation? What exactly did Xiaomi do?
Let's talk about the Foreign Exchange Management Act, which is a law introduced in India in 1999, which governs foreign exchange transactions inside and outside India to prevent capital flight and money laundering. According to this law, people and companies doing foreign exchange transactions inside and outside India must comply or face fines and forfeiture of assets.
So how exactly did Xiaomi India violate the law? According to Indian law enforcement, Xiaomi India remitted 5,550 crore rupees to three foreign companies to pay royalties, one of which is Beijing-based Xiaomi Mobile Software and two U.S. companies. Indian law enforcement believes that the royalties were not determined on the basis of market prices and arm's length principles, but were remitted at the direction of Xiaomi Group.
Therefore, Xiaomi India is considered to have illegally remitted money to foreign companies in violation of Section 4 of the Foreign Exchange Management Act. It is said that between 2015 and 2020, Xiaomi subsidiaries illegally remitted 5,551 crore, equivalent to $725 million, to three foreign companies in the name of paying royalties and licensing fees. The three companies are Qualcomm, Xiaomi Mobile Software and Xiaomi Hong Kong. Therefore, the Indian court froze about 4.8 billion yuan of assets of Xiaomi's subsidiary under the Foreign Exchange Management Act.
In fact, this is also a deliberate fault finding by the Indian government. Xiaomi issued a statement saying that the operation strictly abides by local laws, and overseas remittances are the payment of reasonable royalties, not illegal acts.
However, Xiaomi's rhetoric did not impress the Indian courts. On May 3, the court rejected the Xiaomi subsidiary's application to lift the asset freeze. The court said the Xiaomi subsidiary did not provide sufficient evidence to prove that it did not violate the Foreign Exchange Management Law, nor did it explain why it paid such high royalties and licensing fees to foreign companies. The court also said that the asset freeze did not affect the normal business of Xiaomi's subsidiary, so there was no need to lift it.
At this time, Xiaomi was calculated by the Indian government, and its assets were frozen, making people feel that India is not very friendly. However, if Xiaomi really violates local laws, then there is nothing wrong with the Indian government doing so, after all, if a company wants to enter a country, it must abide by local rules, which is common sense. If Xiaomi is innocent, it needs to communicate further with the Indian government and provide more evidence to clarify, unless the Indian government is really deliberately making things difficult.
In fact, this is the Indian government's "no excuse for wanting to add to the crime".
Xiaomi's response
Xiaomi issued a statement saying that its operations have been strictly abiding by Indian law and that the royalties paid are for the use of licensed technology and intellectual property rights for Indian products, which is normal business practice. Xiaomi also said it would work closely with the Indian government to clarify misunderstandings.
However, Xiaomi's explanation did not move the Indian courts. On May 3, the court denied Xiaomi's application to lift the asset freeze. The court said the Xiaomi subsidiary did not provide sufficient evidence to prove that it did not violate the Foreign Exchange Management Law, nor did it explain why it paid such high royalties and licensing fees to foreign companies. The court also said that the asset freeze will not affect the normal business of Xiaomi's subsidiary, so there is no need to lift it.
No matter what the final outcome of this case is, it is a wake-up call for Xiaomi, reminding the company to enter the international market and must know local policies and regulations well. If we want to cultivate a country's market, we must be familiar with its policy environment and avoid disputes caused by momentary negligence, which is a very important lesson.
2. Other foreign companies such as Google have also been poisoned
Xiaomi isn't the only foreign company to encounter pig-killing plates in India. In the past few years, the suppression and extortion of foreign companies by the Indian government and courts has become the norm. Here are some typical examples:
- In 2018, India's Supreme Court ruled that foreign internet companies such as Google, Microsoft, and Yahoo must pay the Indian government what it calls a "equalization tax," a 6 percent tax rate on online advertising services they provide in India. The ruling has made these companies much less competitive in the Indian market, while also giving local Internet companies an unfair advantage.
- Ironically, most of the executives at Google and Microsoft these days are Indian.
- In 2019, the Indian government introduced the E-Commerce Regulations, which strictly restrict and regulate foreign e-commerce platforms. According to this regulation, foreign e-commerce platforms cannot sell their own brand goods, cannot cooperate exclusively with sellers, cannot price goods discriminatorily, and cannot influence commodity prices. This regulation directly hits the interests of foreign e-commerce platforms such as Amazon and Walmart in the Indian market, forcing them to adjust their business models and strategies.
- In 2020, the Indian government banned 59 Chinese apps, including Tiktok, WeChat, UC Browser, and more, citing "national security." This ban has led to huge losses for these apps in the Indian market, while also depriving Indian users of their freedom and rights to use these apps.
- In 2021, the Indian government banned 118 Chinese games, including Honor of Kings and Exciting Battlefield, from running in India on the grounds of "national security". The ban further hits the development of Chinese games in the Indian market, while also hurting the diversity and innovation of the Indian gaming industry.
These are just a few examples, and many more foreign companies have encountered various difficulties and setbacks in India. It can be seen from this that the Indian government and courts have adopted a very hostile and unfair attitude towards foreign enterprises, and they have used their power and influence to provide protection and preferential treatment for local enterprises, while unreasonably suppressing and blackmailing foreign enterprises, which not only damages the legitimate and legitimate rights and interests of many foreign enterprises in India, but also damages India's own image and reputation.
- 3. India is so suppressing foreign companies, why do we still enter the Indian market?
In the face of the unreasonable suppression of foreign companies by the Indian government and courts, some people may ask: Since the Indian country is so unfriendly, why do we risk freezing assets, being banned from operations, and being subject to tax recovery to invest and operate the Indian market?
In fact, the answer to this question is not difficult to find. We entered the Indian market because it has great potential and attractiveness. India has a population of over 1.3 billion, of which close to half of the population and about 600 million people use the internet. India's economic growth is fast, and the consumption demand of the Indian people is also very strong, especially in the fields of electronic products, e-commerce, social media, games and other fields, with broad market space and development opportunities.
- We also entered the Indian market because we have confidence and strength. Our products and services have obvious advantages and competitiveness in terms of quality, performance, innovation and price. Our brand and image also have a good reputation and recognition among Indian users. Our team and partners also have extensive experience and resources in the Indian market. We believe that as long as we adhere to legal and compliant operations, adhere to user-centricity, and insist on continuous innovation and improvement, we will be able to succeed and grow in the Indian market.
4. How domestic enterprises can respond to India's unreasonable suppression
- As domestic enterprises, how should we deal with India's unreasonable suppression? In my opinion, we can proceed from the following aspects:
- First, we must remain calm and rational. We cannot lose confidence and interest in the entire Indian market because of some of the wrong practices of the Indian government and the courts. We need to recognize that the Government of India and the courts do not represent all the people and society of India. In India, there are also many people and institutions that support and welcome foreign businesses. In India, there are many users and customers who love and use foreign products and services. In India, there are many partners and friends who are willing to cooperate and exchange with foreign enterprises. We need to stay in touch and communicate with these positive forces to maintain our reputation and relationships in the Indian market.
- Second, we must actively defend and resist rights. We cannot allow the Indian government and courts to infringe upon our legitimate rights and interests because of some unfair practices. We must use all available legal means and channels to challenge and refute them. We want to expose and resist their injustice to the international community and the public. We need to seek and enlist their support and help from our government and society. We want the Indian government and courts to know that we are not soft persimmons, we will not give in easily, and we will firmly defend our interests and dignity.
- Third, we must flexibly adjust and adapt. We cannot abandon our goals and plans in the Indian market because of some fickles of the Indian government and courts. We need to adjust and optimize our business model and strategy in a timely manner according to the actual situation and changing trends of the Indian market. We will adjust and improve our compliance system and risk control in a timely manner in accordance with the requirements and changes of Indian laws and regulations. We want to adapt and improve our products and services in a timely manner according to the needs and preferences of Indian users. We want the Indian government and courts to see that we have the ability and resilience to survive and thrive in the Indian market.
- summary
- In short, Xiaomi's unfair experience in India and the freezing of the company's assets of $680 million is a very infuriating and regrettable thing. This also reflects the unreasonable suppression of foreign enterprises by the Indian government and courts, which has become a problem that seriously affects the Indian market environment and order. India has always wanted to become the new "factory of the world" and replace China, but their exhaustive approach has disgusted many countries and led to the withdrawal of many companies.
- Therefore, as a Chinese enterprise, on the one hand, while strengthening our industrial chain advantages and protecting our patents, we must also improve our international competitiveness and open up a larger international market, so that the Indian market cannot be separated from us, and in turn turn to us.