What a Vivo viewfinder reveals of our China ties
PremiumIndia’s case against the firm raises broader questions of our policy stance vis-a-vis Chinese businesses and other relations after Galwan. Doctrinal clarity could reduce uncertainty
The meeting of G-20 foreign ministers in Bali had hectic activity on its sidelines. External affairs minister S. Jaishankar met Russia’s Sergei Lavrov and the US’s Anthony Blinken. But Jaishankar’s first meeting was with his Chinese counterpart, Wang Yi, making it the second between the two ministers in three months, signifying the criticality our relationship with China. The latest engagement, as conveyed by the read-out, was dominated by lingering problems at the Line of Actual Control. India-China relations have been rocky since the 2020 Galwan confrontation, and, as ties remain testy, that problem has spilled over into India’s business and trade dynamics in a way that raises questions over India’s attraction as an investment destination. The latest example is the Enforcement Directorate’s (ED) investigation of China-based phone maker Vivo’s local operations for alleged money laundering and other related charges. While the details of the probe are still sketchy, three broad points emerge from the case.
The first obvious wrinkle is how the ED has belatedly woken up to the vast sums of money Vivo’s management allegedly repatriated to China. The fund transfers were not trifling—over ₹60,000 crore—and somehow bypassed the ED’s radar without raising any alarm, even though other businesses and individuals are routinely hauled up for much smaller amounts. This also begs the question of whether the government’s political agenda is distracting the ED from its core mandate. But another obvious question arises: why has the ED not yet questioned Vivo’s auditors who signed off on its accounts every year? While the probe may yet progress to other local counter-party dealings, including perhaps Vivo’s extravagant sponsorship of the Indian Premier League, it does seem that a desire for optics outweighs the agency’s need to follow a prudent path of inquiry.
This brings us to the final and broader issue at hand. Ever since Galwan, Indian authorities have let a security stand-off bleed into our trade and investment ties. In other words, the government seems to be using reprisals against Chinese investors in India to solve a border problem. First, it issued marching orders to TikTok and a clutch of other apps, which was followed up with similar diktats to other Chinese companies. It has been argued that India’s state capacity must be leveraged to counter China’s border incursions and expansionism at every level, including trade and investment, because Beijing’s statecraft and business outreach are joined at the hip. But such a belligerent argument flies in the face of India-China trade data: total trade between the two nations touched $115.5 billion in 2021-22, growing 33.6% over the previous fiscal year. What’s more, the dice continues to be loaded against India, with our trade deficit with China widening to $72.91 billion from $44 billion. The juxtaposition of these two seemingly contradictory trends unfortunately suggests that the government, while helpless about our growing trade dependence on China, wishes to publicly portray a muscular state by going after Chinese companies. This can have many unintended consequences, but the most detrimental is the awkward signal it sends out to potential foreign investors. Can we afford an approach that offers so little doctrinal clarity on our overall ties with a military adversary? In today’s climate of global uncertainty, we must not allow a confused picture to replace the message of an open economy.