India probes ZTE and Vivo over finances, sparking Chinese protests

Clever asymmetrical economic warfare makes Beijing very uncomfortable


India's government has reportedly started probes into the local activities of Chinese tech companies Vivo and ZTE, prompting a rebuke from China's foreign ministry.

As was the case when Indian authorities seized $725 million from Chinese gadget-maker Xiaomi, the investigations focus on possible irregular financial reporting that may amount to fraud, according to newswire Bloomberg's original report on the matter.

A Bloomberg reporter asked about the state of the investigations at the daily press conference staged by China's Ministry of Foreign Affairs, which produces a transcript of each day's event.

Zhao Lijian, China's famously feisty foreign ministry spokesperson, said Beijing "is closely following the situation."

"The Chinese government always asks Chinese companies to abide by laws and regulations when doing business overseas," he added. "The Indian side should act in accordance with laws and regulations and provide a fair, just and non-discriminatory business environment for Chinese companies investing and operating in India."

That last sentence is notable, because China has myriad requirements before foreign investors can open for business – sometimes even requiring source code reviews – and an opaque legal system.

Those factors mean that Indian businesses have very little presence in China.

At the recent Black Hat Asia conference, The Register encountered the idea that China has therefore been frustrated by its inability to retaliate against Indian action such as bans on hundreds of Chinese apps.

Samir Saran, president of the Observer Research Foundation, a commissioner of The Global Commission on the Stability of Cyberspace, and a member of Microsoft's Digital Peace Now Initiative, said after those bans China realized that no Indian apps are available in Chinese app stores, making like-for-like retaliation impossible.

Indian buyers enjoy access to the Chinese companies' products – Xiaomi and Vivo are the nation's number one and number four smartphone vendors by market share – and the nation is reportedly under consideration as a manufacturing base for the two companies. A third Chinese handset-maker, Oppo, has also reportedly considered Indian manufacturing.

Beijing could require the three brands to look elsewhere for manufacturing capacity, which would hurt. India could retaliate by restricting access to its colossal domestic market – and it would have public sentiment on its side, as bans of Chinese apps on security grounds were well received. ®

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