Opinion | How India’s unspoken strategy to drive out Chinese firms can backfire

In early October, four executives of Chinese smartphone maker Vivo, including one Chinese national, were arrested in India in connection with a money laundering investigation. These arrests added to the legal troubles of various Chinese phone makers in India. In 2022, Chinese mobile phone companies Vivo and Xiaomi, which operate in India, were accused of tax evasion under the Prevention of Money Laundering Act that came into effect in 2005.

While the Chinese firms denied the allegations, these accusations come amid rising tensions between Beijing and New Delhi over issues ranging from border disputes to India’s increasing scrutiny of Chinese businesses and investment.

Officially, India is open to Chinese business. Piggybacking on Indian Prime Minister Narendra Modi’s “Make in India” campaign in 2014, Chinese firm Vivo established its own manufacturing facility to produce mobile phones in the state of Uttar Pradesh. This move was a huge success, making Vivo the second-largest smartphone brand in India after Samsung.

Behind the official narrative, Modi is trying to protect and grow its manufacturing sectors with the hope of expanding its export markets. To do that, India needs to reduce its dependence on China and develop its end-to-end supply chain solutions domestically, from making parts to final assembly.

As a strategy, India’s government develops tools to make Chinese firms’ lives in India difficult or impossible. Using arguments on the grounds of national security, India has banned hundreds of Chinese apps such as TikTok, as well as Chinese telecoms equipment makers such as Huawei and ZTE.