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India arrests executive of Chinese smartphone giant Vivo amid fraud probe

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New Delhi/Hong Kong
CNN

An executive from Vivo, one of China’s leading smartphone makers, has been arrested in India as part of a money laundering investigation, raising fears of a new crackdown on Chinese companies in the country.

Guangwen Kuang, chief administrative officer of Vivo India, was arrested by India’s Enforcement Directorate (ED) on Tuesday, his lawyer, Mudit Jain, told CNN. The ED is the country’s leading financial crimes investigation agency, responsible for investigating money laundering and violations of foreign exchange laws.

Kuang, a Chinese national, was arrested along with three others and would be held for three days, according to a court document shared with CNN by Jain.

One of the other detainees was a person who helped Vivo establish its offices in India, and the other two were accountants, according to the document.

In a statement to CNN, a Vivo spokesperson confirmed that an employee had been arrested and promised that the company would “exercise all available legal options.”

“The recent arrest concerns us deeply,” the representative said. “Vivo firmly adheres to its ethical principles and remains dedicated to upholding the law. »

Allegations of money laundering against Vivo were first raised in July 2022, when the ED said it carried out searches at 48 Vivo locations in the country and seized $60 million from the company’s bank accounts. business.

The agency accused Vivo of tax fraud and said the company had sent 624.8 billion rupees ($7.9 billion), mostly to China.

“These fund transfers were carried out in order to expose huge losses in Indian incorporated companies to avoid payment of taxes in India,” the ED had said at the time.

The company said at the time that it was cooperating with the investigation.

The raids came two months after India seized more than $700 million from another major Chinese smartphone maker, Xiaomi, which was also accused of illegally moving money out of the country .

Xiaomi has denied any wrongdoing, saying all its operations are “firmly in compliance with local laws and regulations.”

Xiaomi and Vivo are extremely popular with Indian consumers, with both ranking among the top three in the country’s vast smartphone market, behind Samsung.

Despite the regulatory crackdown, Vivo remains the second-largest smartphone brand in India, with 17% of the market in the second quarter, according to Counterpoint Research.

Xiaomi, for its part, saw its market share drop from 19% to 15% over the same period.

Relations between China and India deteriorated significantly after a deadly clash at their disputed shared border in 2020. Indian authorities subsequently banned Chinese apps and subjected deals with Chinese companies to greater scrutiny.

Since then, tensions between India and China have continued to escalate.

Vivo’s issues this week sparked a swift reaction in Chinese media. State tabloid Global Times accused India of “rising protectionism”.

The executive’s detention appears to signal a “stepped-up crackdown on Chinese businesses,” the outlet said in a report Wednesday.

The Chinese embassy in India has previously warned that investigations into Chinese companies in India risked harming its reputation with foreign investors and had disrupted “normal business activities”.

— Vedika Sud contributed to this report.

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