Xiaomi smartphones displayed in a storefront in India. (People News/AI-generated image)
[People News] As Chinese Communist Party leader Xi Jinping prepares to attend the 17th BRICS (Brazil, Russia, India, China, South Africa) leaders' summit in India, foreign media have reported that the Indian government is planning a large-scale anti-fraud investigation into the Chinese smartphone giant Xiaomi. This revelation, which comes at a sensitive time just before the leaders' meeting, not only casts doubt on the Beijing authorities' claims of a 'thaw in China-India relations' and 'achievements in major power diplomacy,' but also underscores the profound challenges faced by Chinese enterprises, which are increasingly becoming political and economic pawns in the international geopolitical arena.
Strategic Diplomatic Timing: India's Enhanced Regulatory Measures
According to a report by Reuters citing informed sources, the Serious Fraud Investigation Office (SFIO) of India had recommended in an internal memorandum as early as May this year that a thorough investigation be launched into Xiaomi's funding flows in India, its organizational structure, and whether it has legally secured mandatory foreign investment approvals. The Indian Ministry of Commerce and the Ministry of Corporate Affairs are currently reviewing this memorandum.
The memorandum highlights that the primary focus of the investigation is to scrutinize the 'Beneficial Ownership' between foreign investors and group entities, ensuring that any changes in control are accurately disclosed. The Serious Fraud Investigation Office (SFIO) has also called for a collaborative inter-departmental investigation, involving tax authorities, the foreign exchange management bureau, and other relevant agencies, to perform 'material misstatement tests' on Xiaomi's financial statements and audit reports. Furthermore, there are plans to summon both current and former executives, including the Chief Financial Officer (CFO) and compliance officer, to provide testimony.
Analysts note that the Modi government strategically chose to release information about the investigation just before Xi Jinping's visit, indicating a politically calculated timing. Historically, Beijing has often labeled legal investigations faced by Chinese companies abroad as 'political persecution' or 'business bullying.' However, India's current actions, which cite 'financial regulation,' 'anti-money laundering,' and 'crackdown on corporate fraud,' have effectively undermined the Chinese Communist Party's 'wolf warrior diplomacy,' placing it in a defensive position at the diplomatic negotiation table.
From 'tax collection and asset seizure' to 'control verification,' Chinese-funded enterprises are experiencing a systematic encirclement.
This is not the first time Xiaomi has encountered difficulties in India. Since 2022, the Indian government has frozen the bank assets of Xiaomi's Indian subsidiary totaling 55.51 billion rupees (approximately 584 million USD) on the grounds of 'suspected illegal remittances to foreign entities,' and these assets remain frozen. Additionally, in 2024, India's antitrust agency accused Xiaomi of colluding with certain e-commerce platforms to sell products exclusively, allegedly violating competition laws.
In contrast to past tax disputes or fund freezes, the investigation framework introduced by the SFIO this time encompasses 21 items, with the goal of evaluating whether Xiaomi has 'de facto control' over local sellers or partners in India, thus evading the stringent review mechanisms that India has established for Chinese investments. This signifies a shift in India's approach to Chinese enterprises, evolving from 'economic bloodletting' to a 'detailed examination of equity and operational structures'.
Due to ongoing regulatory policies and market adjustments, data from Counterpoint Research indicates that Xiaomi's market share in the Indian smartphone market has fallen from 19% to 13%, resulting in a drop to fourth place; its projected revenue in India for 2025 is estimated at $2.52 billion, representing a substantial decline of 40% compared to three years ago.
In response, a spokesperson for Xiaomi stated that the company has not received any official notification or communication from the SFIO and reiterated that Xiaomi has consistently complied with local laws in India.
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Commentators on this incident have noted that it starkly illustrates the current dynamics of Sino-Indian relations, which are marked by 'political-economic separation, superficial détente, and substantial confrontation'. While the Chinese Communist Party continues to promote narratives of 'BRICS unity' and 'diplomatic victories' domestically, the Indian government has maintained its vigilance and punitive measures against Chinese enterprises in the real economy.
As geopolitical risks escalate, Chinese companies that are aligning with the Beijing authorities' 'going out' strategy are increasingly falling victim to the diplomatic tug-of-war between the two nations. While the Modi government rolls out the red carpet for leaders of the Chinese Communist Party, it simultaneously applies targeted pressure in legal and market spheres. This demonstrates that without fundamental political mutual trust, any officially declared prosperity is unlikely to mask the harsh economic realities of geopolitical fragmentation.
(First published by People News)
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