Xiaomi, a Chinese company, informed the Indian government that their stringent oversight of Chinese businesses has discouraged suppliers of smartphone components from opening offices in India, according to reports quoting information based on a letter and a person with direct knowledge of the situation.

According to the letter dated February 6, Xiaomi, which holds the largest market share of smartphones in India (18%), also requested that New Delhi take into account cutting import duties for specific smartphone components and providing manufacturing incentives.

The Chinese manufacturer uses largely local parts that are imported from China and other countries to assemble cellphones in India. In answer to a question from India’s information technology ministry regarding how New Delhi might advance the nation’s component manufacturing industry, Xiaomi wrote the letter.

Following a border skirmish between the two nations in 2020 that claimed the lives of at least 20 Indian soldiers and four Chinese soldiers, India increased its monitoring of Chinese companies. Large Chinese corporations’ investment plans have been thrown off, and Beijing has repeatedly protested this scrutiny.

Even if Chinese businesses doing business in India are reluctant to discuss the scrutiny in public, Xiaomi’s letter demonstrates that they are still having difficulty there, particularly in the smartphone industry where a large number of vital components are sourced from China.

The president of Xiaomi India, Muralikrishnan B., stated in the letter that in order to entice component suppliers to establish local operations, India needed to focus on “confidence building” initiatives.

“There are apprehensions among component suppliers regarding establishing operations in India, stemming from the challenges faced by companies in India, particularly from Chinese origin,” Muralikrishnan said, without naming any companies.

The letter made reference to compliance and visa-related problems, but it did not go into detail. It stated that “the government should address these concerns and work to instil confidence among foreign component suppliers, encouraging them to set up manufacturing facilities in India.”

There were no comments on the issue available from Xiaomi and the Indian IT ministry.

In an email to Reuters, China’s foreign ministry expressed knowledge of Xiaomi’s worries and expressed the hope that “India will earnestly fulfil its commitment to open cooperation and provide a fair, just, transparent and non-discriminatory business environment.”

“This is also in line with India’s own interests,” the statement said.

Indian officials said last year that the Chinese smartphone giant Vivo Communication Technologies had embezzled $13 billion in funds from India and had violated several visa regulations.

Additionally, India has blocked more than $600 million in Xiaomi assets because it believes the business passed off the payments as royalties. The allegations stem from alleged unlawful remittances to foreign companies.

Both Chinese businesses reject any misconduct.

Since 2020, India has also prohibited over 300 Chinese apps, including TikTok from ByteDance, and blocked projects that were in the works, including those of Chinese manufacturers BYD and Great Wall Motor.

According to the source, a lot of executives from Chinese electronics businesses have trouble obtaining visas to enter India, and as a result of New Delhi’s stringent examination, the companies continue to have delayed investment clearances.

On January 31, New Delhi took action to lower import duties on phone camera lenses and battery covers.

According to the letter, Xiaomi also requested tariff reductions on sub-components used in phone covers, USB cords, and batteries.

In the letter, Xiaomi stated that lowering import duties might “increase India’s manufacturing competitiveness… in terms of costs,” but it also mentioned that greater incentives would be needed to persuade component makers to locate their operations in India.

Rajesh Kumar Singh, the head of India’s industrial policy department, said in January that if China invests peacefully across their border, India would relax its stricter regulations.

(Adapted from MoneyControl.com)