What’s going on with Xiaomi in India?

Chinese tech company Xiaomi is pretty big in India, with around a 23% grip on the local smartphone market share. But, the relationship between China and India has somewhat soured over the last few years after their troops have clashed in the disputed Himalayan region. With that, some Chinese apps have been removed in India because of national security concerns, and the local sentiment toward Chinese companies has become a bit iffy.

Over the weekend, India’s anti-money-laundering agency took control of Xiaomi Technology India’s bank accounts, saying that Xiaomi made illegal payments disguised as royalty fees. The agency said that the money went to three foreign companies with ties to Xiaomi. This comes after Xiaomi India’s former head, Manu Jain, was pulled into an investigation after being accused of violating foreign exchange laws.

Key comments:

“Directorate of Enforcement (ED) has seized Rs.5551.27 Crore of M/s Xiaomi Technology India Private Limited under the provisions of Foreign Exchange Management Act,1999. Xiaomi India is wholly owned subsidiary of China based Xiaomi group. This amount of Rs. 5551.27 Crore lying in the bank accounts of the company has been seized by the ED. ED had initiated investigation in connection with the illegal remittances made by the company in the month of February this year,” wrote the ​​agency in a press statement.

“The Company started its operations in India in the year 2014 and started remitting the money from the year 2015. The Company has remitted foreign currency equivalent to INR 5551.27 Crore to three foreign based entities which include one Xiaomi group entity in the guise of Royalty. Such huge amounts in the name of Royalties were remitted on the instructions of their Chinese parent group entities. The amount remitted to other two US based unrelated entities were also for the ultimate benefit of the Xiaomi group entities.”