India arrests executive of Chinese smartphone giant Vivo in fraud probe

New Delhi/Hong Kong
CNN
 — 

An executive at Vivo, one of China’s top smartphone makers, has been arrested in India in connection with a money laundering probe, raising fears of a renewed crackdown on Chinese businesses in the country.

Guangwen Kuang, the head of administration at Vivo India, was taken into custody on Tuesday by India’s Enforcement Directorate (ED), his lawyer, Mudit Jain, told CNN. The ED is the country’s main financial crimes investigation agency, responsible for probing money laundering and violations of foreign exchange laws.

Kuang, a Chinese national, was arrested alongside three other people and would be held in custody for three days, according to a court document shared with CNN by Jain.

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

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

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

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

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

“These remittances were made in order to disclose huge losses in Indian incorporated companies to avoid payment of taxes in India,” the ED 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 big Chinese smartphone maker, Xiaomi, which was also accused of moving money out of the country illegally.

Xiaomi denied wrongdoing, saying all its operations were “firmly compliant with local laws and regulations.”

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

Despite the regulatory crackdown, Vivo is still India’s second biggest smartphone brand, commanding 17% of the market in the second quarter, according to Counterpoint Research.

Xiaomi, meanwhile, has seen its market share slip from 19% to 15% in the same period.

Relations between China and India soured significantly after a deadly clash at their shared contested border in 2020. Authorities in India later banned Chinese apps and subjected deals with Chinese firms to greater scrutiny.

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

Vivo’s troubles this week prompted a swift reaction in Chinese media. State-run tabloid Global Times accused India of “rising protectionism.”

The executive’s detainment appears to signal a “hardened crackdown on Chinese companies,” the outlet said in a report Wednesday.

China’s embassy in India has previously warned that the probes of Chinese firms in India risked damaging its reputation among foreign investors and have disrupted “normal business activities.”

— Vedika Sud contributed to this report.