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Tensions between India and China: Xiaomi is the latest Chinese company to face the heat in India

In a statement on Friday, India’s Enforcement Directorate – the country’s main financial investigative agency – accused the Indian subsidiary of smartphone maker Xiaomi of violating foreign exchange laws by making “illegal money transfers”.

The agency said that Xiaomi India, following instructions from its parent company, “had paid in foreign currency equivalent to [55.5 billion rupees, $726 million] to three foreign-based units, which include a Xiaomi group unit in the form of royalty. ”

Xiaomi started its business in India in 2014 and started paying money a year later, the agency added. The Indian authorities have now seized a similar amount, “lying in the company’s bank accounts.”

“Xiaomi India procures the fully manufactured mobile sets and other products from the manufacturers in India,” said the Enforcement Agency. “Xiaomi India has not used any service from the three foreign-based entities to which such amounts have been transferred,” the agency added.

It also accused the company of providing “misleading information to the banks while sending the money abroad.”

Xiaomi India, which distributes Mi-branded smartphones, said in a statement that “all our operations is in full compliance with local laws and regulations. “In a Twitter post On Saturday, the company said it believed the royalty payments and statements to the bank were “all legal and truthful”.

Payments were made for “unlicensed technologies and IPs used in our Indian version products.”

India has been having a hard time with Chinese companies since border tensions escalated between the world’s most populous countries two years ago. By 2020, India banned more than 200 apps – many of which were Chinese, including the wildly popular video platform TikTok.
Earlier this year, India again banned several Chinese apps belonging to tech companies such as Tencent (TCEHY), Ali Baba (BABY) and NetEase (DETECTOR). In response, Beijing had said it was “seriously concerned” about the actions India has taken against Chinese companies.

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