Author: Deng Xinhua
India's Enforcement Authority said June 9 that Xiaomi was suspected of violating the country's Foreign Exchange Management Act by "illegally transferring funds to foreign entities."
Based on this allegation, the total amount of 55.51 billion rupees (about 680 million US dollars, nearly 5 billion yuan) of millet previously seized by the Indian authorities may be formally confiscated.
Why did India make such a frenzied move?
01 The international version of "Closing the Door and Fighting Dogs" was staged, and there was no one in India
When Xiaomi entered India, it was welcomed by India. Xiaomi founder Lei Jun and Indian Prime Minister Modi Laoxian, "like brothers" took a group photo. Xiaomi mobile phones have indeed been very successful in India, dominating the Indian mobile phone market.
Indian Prime Minister Narendra Modi and Lei Jun took a group photo
However, in the first quarter of this year, the share of Xiaomi's mobile phone market fell to third place, with a share of 16%, down 44% year-on-year. South Korea's Samsung maintained its leading position in the Indian smartphone market for two consecutive quarters with a 20% share.
Now Xiaomi has encountered the international version of "closing the door and hitting the dog", which is really snowstorm.
You know, Xiaomi's adjusted net profit in 2022 is only 8.5 billion yuan, and nearly 5 billion yuan was confiscated this time, which is equivalent to more than half of last year's profit in vain.
With the great success of China's reform and opening up, Vietnam and India have subsequently achieved economic reform success, ASEAN has also made efforts, and the global economic center of gravity has moved from the Atlantic region to the Indo-Pacific region for the first time in hundreds of years. In today's era, the economic competition among countries in the Indo-Pacific region is the fiercest and most exciting.
India treats millet this way, although millet has suffered huge damage, but India itself may be even more damaged. Others play "Horse Bone", you play "Closing the Door and Fighting Dogs" in India, do you want to take the initiative to weaken your competitiveness? Do you want to give up the opportunity to Vietnam?
In terms of "horse bones", India should learn from Ireland, a small island nation in Europe.
In the early years, in order to develop the economy, Ireland attracted investment to Apple and promised to give Apple a large number of tax incentives, which would have been a win-win situation. But the EU is gone.
In 2016, the European Commission ruled that Ireland would have to collect up to 13 billion euros in taxes from Apple in the United States.
13 billion euros, at the nearest exchange rate, about 100.3 billion yuan! This is many times larger than the nearly 5 billion yuan that Xiaomi confiscated by India! Moreover, Ireland has a population of only 5 million, while India has a population of 1.4 billion.
However, the Irish government said, we absolutely do not want this money! Irish Finance Minister Noonan "deeply opposed" the Commission's ruling. The Irish government also appealed to the European Union and firmly opposed the collection of this tax.
In late 2017, the Irish government agreed with Apple to receive $15.4 billion in taxes paid by Apple through an escrow account until the EU ruling.
The reason why I put the money in an escrow account is to show that I will not touch a single cent of this money.
Image source: Apple
In 2020, the Permanent Court of Justice of the European Union ruled that Apple did not have to pay 13 billion euros in additional taxes. But the European Commission doesn't do it. On May 23 this year, the European Commission appealed to the EU's highest court to overturn the ruling of the Permanent Court of Justice of the European Union and make Apple pay 13 billion euros in taxes. The lawsuit is yet to be settled. On November 5, the EU's highest court will make a ruling, but the ruling is not binding.
You see, Ireland has been fighting a lawsuit with the EU for 7 years in order not to receive this money from Apple!
This amount of money is undoubtedly a huge amount for Ireland, which has a population of 5 million. But this small island nation understands that for the sake of this one-time income, it is very, very uneconomical to have a bad reputation of "closing the door and beating dogs" and scaring away foreign investment.
However, India, with a population of 1.4 billion, is staring at Xiaomi's 5 billion yuan of "small money", which is really no one in the country!
Modi Laoxian, when you first came to power, you proposed to develop manufacturing, do a good job in infrastructure, and vigorously attract foreign investment, have you forgotten your original intention?
Not long ago, Apple also said that it plans to transfer 45% of its production capacity from China to India, and Buffett said in an interview with CNBC: "Apple's decision to move its supply chain to the Indian market is very stupid."
Buffett is right!
2 Populism has held back India's development
Today's world has given the Indo-Pacific region many opportunities.
The development of India and Vietnam is particularly interesting. But it seems that whether it is Vietnam or India, it is still so far off.
Take India, both the international environment and the demographic situation are very superior.
Not to mention the international environment, Modi still has a set in this regard, which is considered to be more diplomatic among peers.
In terms of population situation, last year China had 9.62 million newborns, while India had 23 million! A country in an economic upswing and such a good demographic situation, no wonder companies from all over the world are running to India, and Chinese companies are no exception. Huawei, Xiaomi, OPPO, vivo, etc., have been deployed in India many years ago.
But populism is very prevalent in India. Taking the attitude towards China as an example, the 74-year-old retired Indian lieutenant general Sharaji Singh Panag published an article in the Indian media, the main point of view is that there will be a war between China and India. This is not his opinion alone. 69.3% of people in India believe that if China and India go to war, India will win. These statements, sound and feel like are not... Weird?
Therefore, the encounters of companies such as Douyin, Xiaomi, and OPPO in India have their own environmental background. A small number of Indians misunderstand that they love peace and seek development Chinese, and have no intention of curbing India's development.
If there are real reformers in India, efforts should be made to guide and defuse the populist sentiments of Indians. With so much competition in the Indo-Pacific, how can populism be held back by development? Populism is cool for a while, but it lags behind in the competition between India and Taiwan, which is a hundred years of regret.
Modi has taken some reform measures that have contributed a lot to India's current economic success. However, he is still not a true reformer.
Since Modi Laoxian became India's prime minister, he has put forward a series of major strategies such as "Make in India", "Digital India", "Monsoon Plan", "Operation East", etc., and also put forward the slogan of "speeding up Indian railways".
During the coronavirus pandemic in 2020, Modi launched another stimulus package worth Rs 20 trillion. He advocated "bold reform" and "self-reliance" to turn the 21st century into the "Indian century".
In 2022, Modi Laoxian proposed at the celebration of India's 75th anniversary of independence that India aims to become a developed country in 25 years.
On August 15, Indian Prime Minister Narendra Modi spoke at the celebration of the 75th anniversary of India's independence that day.
Modi wants to push for policies to develop the country's power, defense and digital technology industries. There is nothing wrong with the direction, but the practice is very problematic, and the use of the so-called "suspected violation of the Foreign Exchange Management Law" to engage in Xiaomi is really shameful.
Not only that, India's Economic Times reported on June 13 that the Indian government has required Chinese mobile phone manufacturers to do the following in their business in India:
1. Introduce Indian equity partners in the Indian business, and Indian capital holds 51% of the shares in the joint venture.
2. Indian executives must be appointed to key positions such as CEO, COO, CFO, CTO.
3. The supply chain must use designated Indian partner manufacturers.
4. Through joint ventures with Indian enterprises, improve local manufacturing capacity and component level, and gradually achieve all exports from India.
5. The distributor must be a local enterprise in India.
According to reports, Xiaomi, OPPO, Realme, Vivo and other Chinese companies participated in the meeting, and the specific implementation time limit has not yet been announced.
An Indian official who attended the meeting said that India must have control of the management and board of directors of the Chinese mobile phone company (in India).
India's approach is tantamount to "buying Chinese companies in disguise", and can even be said to be "open robbery", superficially damaging Chinese companies such as Xiaomi, and in the long run damaging India's foreign investment attractiveness and international competitiveness.