NEW DELHI: Tougher scrutiny of foreign investment in India has soured the plans of China’s smartphone manufacturers seeking to expand beyond selling hardware for a bigger share of the South Asian country’s competitive financial services market.
“India is a very important market…This will have a dampening effect,” said an industry executive familiar with Xiaomi’s consumer finance plans. In April, the government said it would monitor FDI from companies based in neighbouring countries, in what was widely seen as a move to keep Chinese firms from taking stakes in distressed local businesses amid the coronavirus crisis. China has called the rules “discriminatory”.
Alok Sonker, a partner at Indian law firm Krishnamurthy & Co, said the government needs to sign off on the initial capital infusion into an entity before it applies to the central bank for a licence. Neil Shah, a vice president for research at Counterpoint, said that an NBFC would give Xiaomi and Oppo access to user data and spending patterns which can be exploited to boost revenue for other services. Profit margins from their smartphone sales are estimated at 1-2%.
India is lucrative for Chinese players as some have encountered regulatory setbacks in other Asian markets. Xiaomi’s financial unit, for example, had to shut down in Indonesia in late 2018 due to a disagreement with regulators over the type of licence it needed.
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