Why in news?
The Enforcement Directorate (ED) has filed a chargesheet against Vivo China, accusing the company of siphoning off Rs 70,000 crore from India under the guise of import payments.
What’s in today’s article?
- Chinese Commercial Entities (CCE) and India’s internal security
- Steps taken by Indian govt to address the issue
- Vivo China siphoned off Rs 70,000 crore
Chinese Commercial Entities (CCE) and India’s internal security
- Background
- A disturbing picture of Chinese Commercial Entities (CCE) has emerged after a series of actions by Indian authorities since 2020.
- The investigation began after the June 15, 2020, incident in Ladakh’s Galwan.
- Actions by Indian authorities included busting of spying rings, tax raids on major Chinese telecom companies, a crackdown on mobile apps and a study of incoming investments into India.
- The actions by these agencies revealed a web of companies and individuals indulging in espionage, profiling of high value individuals, large-scale tax evasion and exfiltration of bulk data.
- Findings of investigating agencies
- The assessment by agencies found that the Chinese commercial entities operate in India with five primary objectives:
- influencing minds; build economic control; acquisition of data; for espionage and to target scientists to compromise innovation and intellectual property rights (IPRs).
- The objective of counterintelligence is pursued through top officials of Chinese companies in India.
- Small-size shell companies were also used as financial conduits to fund espionage rings and resident agents.
- Modus operandi of these entities
- Hundreds of small companies controlled by Chinese nationals have dummy Indian directors and managers for a show of legitimacy.
- Many of these companies did not physically exist at their registered offices. However, their banking accounts were active and being operated from abroad.
- A cheap (and sometimes below production cost) pricing model that has given them control of a large chunk of the telecom and hardware markets in India.
- Investigations also show that some senior Chinese employees of these companies are documented members of the Chinese Communist Party.
- Hence, Beijing has a strong leverage on their operations in India.
- Agencies also found a seamless flow of data to Chinese servers through remote access of modems, switches, routers and networks sold and installed by these companies in India.
- Similarly, a seamless data link through Chinese origin mobile phones was also established during investigations.
- The data collected has helped Chinese artificial intelligence (AI) engines create portraits, with biometric details of millions of Indians.
- Threat for India’s Internal Security
- Access to personal data of Indians
- Chinese entities have been storing away information and data using multiple methods, with the objective of gaining strategic advantage over India’s economic and security systems.
- Influencing minds
- Deep cover resident agents, posing as officials of these companies, are attempting to fund and influence masses in India.
- This is being done to foment the sentiments of masses and create internal disturbances.
- Such entities are also used to influence Tibetan monks living in India.
- Chinese national Luo Sang, who was arrested for money laundering in August 2020, was actively sending money in packets to Tibetan monks.
- Agencies are suspecting that it was intended to gather information about the Dalai Lama and the Tibetan government in exile.
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- Espionage and money laundering
- Small-size shell companies were also used as financial conduits to fund espionage rings and resident agents.
- E.g., operating under the name of Charlie Peng, the web is believed to have laundered over Rs 1,000 crore, with some of the proceeds used to gather intelligence in India.
- Recently, a top executive of a telecom company found in the possession of sensitive documents.
- The investigation also revealed of exhaustive profiling of key business leaders.
Steps Taken By The Government
- Crackdown by investigating agencies
- Chinese commercial entities are under sustained investigation by the intelligence agencies since 2020.
- Multiple raids have been conducted by the ED under the provision of Prevention of Money Laundering Act.
- Clampdown on Chinese investment
- In 2020, Central govt declared that foreign investments from countries with which India shares land border shall be under approval route.
- Since China shares a land boundary with India, this announcement clamped down on investments from China making prior government clearance mandatory for all forms investments, even indirect ones.
- Ban on Chinese app
- The govt of India has banned more than 250 Chinese apps including PUBG Mobile, Tiktok, Shein, AliExpress and more.
- Other steps
- Intelligence Bureau created a new wing — China Coordination Centre — to collaborate with financial enforcement agencies to investigate Chinese companies.
- 57th Director General of Police conference, held in January 2023, discussed the issue of influence wielded by Chinese commercial firms.
Vivo China siphoned off Rs 70,000 crore
- About the news
- ED has filed a chargesheet against Vivo China, accusing the company of siphoning off Rs 70,000 crore from India under the guise of import payments.
- Allegations made by ED
- The ED claims that Vivo India remitted Rs 70,837 crore abroad since 2014, with large sums being sent to overseas entities controlled by Vivo China.
- These entities, based in Hong Kong, Samoa, and the British Virgin Islands, were allegedly set up as trading companies to conceal their connection to Vivo China.
- The ED also stated that Vivo China tried to hide its relationship with Vivo India, creating a structure that distanced itself on paper while maintaining control over the distribution network.
- Special Purpose Vehicles, like Multi Accord Ltd in Hong Kong, were set up to exert control over Vivo India.
- The chargesheet also alleges that Vivo India and its state distributor companies mis-declared their ownership to the Indian government.
- Chinese nationals used Indian firms like Labquest Engineering Pvt Ltd and Lava International Ltd to carry out unauthorized business activities and obtain invitations to India without raising suspicion.
