India has seized over $700 million from one of China’s largest tech companies after claiming that it is transmitting money out of the country illegally.
In a statement on May 13, India’s Enforcement Directorate — the country’s main financial investigation agency — condemned the Indian subsidiary of smartphone maker Xiaomi for not complying with foreign exchange laws by making “illegal remittances.”
The agency said Xiaomi India, following orders of its parent company:
“Had remitted foreign currency equivalent to [55.5 billion rupees, $726 million] to three foreign-based entities which include one Xiaomi group entity in the guise of royalty.”
Xiaomi set up its operation in India in 2014 and began remitting money the following year, the agency added. The Indian authorities have currently seized the corresponding amount of funds “lying in the bank accounts of the company.”
The Enforcement Directorate said:
“Xiaomi India procures the completely manufactured mobile sets and other products from the manufacturers in India. Xiaomi India has not availed any service from the three foreign-based entities to whom such amounts have been transferred.”
It also accused the company of presenting “misleading information to the banks while remitting the money abroad.”
Xiaomi India, which circulates Mi-branded smartphones, said in a statement that “all our operations are firmly compliant with local laws and regulations.” The company said in a Twitter post on Saturday that it believed that the royalty payments and statements it compiled for the bank were “all legit and truthful.”
The payments were a settlement for “in-licensed technologies and IPs used in our India version products.”
India has been hard on Chinese companies since border tensions aggravated between the world’s most populous countries two years ago. India banned over 200 apps in 2021, most of which were Chinese, including the very popular video platform TikTok.
Also, India banned several Chinese apps earlier this year, owned by tech companies such as Alibaba (BABA), Tencent (TCEHY), and NetEase (NTES). In response, Beijing had said that it was “seriously concerned” about measures India has taken against Chinese companies.