Explosive Fraud Investigation: Top Chinese Smartphone Executive Arrested in India!

Guangwen Kuang, the head of administration at Vivo India, was arrested in India on Tuesday by the Enforcement Directorate (ED), the country's main financial crimes investigation agency. The arrest has raised concerns about a potential crackdown on Chinese businesses in India.

Kuang, a Chinese citizen, was arrested along with three other individuals and will be detained for a period of three days, as stated in a court document provided to CNN by Jain.

Among the remaining detainees, one was an individual who had assisted Vivo in establishing its offices in India, while the other two were accountants, as mentioned in the document.

A Vivo spokesperson confirmed to CNN that one employee has been arrested and assured that the company will exhaust all legal alternatives. The representative expressed deep concern about the recent arrest and emphasized that Vivo remains committed to upholding ethical principles and complying with the law.

On 29 October 2021, a VIVO smartphone store was spotted on a street in Kolkata, India. The shipment of smartphones in India experienced a decline of 2%, amounting to 54 million units in the September quarter. (Photo by Debarchan Chatterjee/NurPhoto via Getty Images)

Debarchan Chatterjee/NurPhoto/Getty Images

China says India risks scaring away investors with raids on its companies

Vivo faced allegations of money laundering in July 2022 after the ED conducted searches at 48 Vivo locations in the country. The agency seized $60 million from the company's bank accounts and accused Vivo of tax fraud, mentioning that the firm had remitted a significant amount of 624.8 billion rupees ($7.9 billion) to China.

The ED stated that these remittances were made to hide significant losses in Indian incorporated companies as a means to evade tax payments in India. The company, during that period, stated its cooperation with the investigation.

Two months later, India conducted raids on another major Chinese smartphone manufacturer, Xiaomi, seizing over $700 million. Xiaomi, like Vivo, was accused of illegally transferring funds out of the country. However, Xiaomi vehemently denied any wrongdoing, asserting that all of its operations strictly adhere to local laws and regulations.

Customers are seen examining Xiaomi smartphones at a Mi store in Gurgaon in this photograph captured on August 20, 2019. The image was taken by Sajjad HUSSAIN and is a part of the AFP collection. It has been provided by SAJJAD HUSSAIN/AFP via Getty Images.

Sajjad Hussain/AFP/Getty Images

India and China's political tensions are hitting the smartphone market. But they need each other

Xiaomi and Vivo are widely favored by Indian consumers, holding positions in the top three leading smartphone brands in the large Indian market, with Samsung in the lead.

Even with the regulatory measures in place, Vivo continues to maintain its position as the second largest smartphone brand in India, with a notable 17% market share in the second quarter, as reported by Counterpoint Research.

Xiaomi's market share, on the other hand, dropped from 19% to 15% during this time, reflecting the deteriorating relationship between China and India following a fatal clash at their disputed border in 2020. Subsequently, Indian authorities imposed bans on Chinese apps and heightened scrutiny on deals involving Chinese companies.

India and China's ongoing tensions have persisted, resulting in a recent response from Chinese media. In a swift reaction, the state-run tabloid Global Times accused India of engaging in "rising protectionism."

The detention of the executives is seen as a clear indication of a stricter approach towards Chinese companies, according to a report by the news outlet on Wednesday. The Chinese embassy in India has expressed concern in the past, stating that investigations into Chinese firms may harm its image among international investors and disrupt regular business operations.

Vedika Sud contributed to this report.