Chinese Commercial Entities and India’s Internal Security

What’s in today’s article?

• Why in news?
• Chinese Commercial Entities (CCE) and India’s internal security
• Background:
• What were the findings of investigating agencies?
• What is the modus operandi of these entities?
• Chinese Commercial Entities: Threat for India’s Internal Security
• Steps Taken By The Government
• News Summary: Chinese Commercial Entities and India’s Internal Security
• What is Vivo – India Case?
• Allegations made against Vivo – India

Why in news?

• The Enforcement Directorate (ED) has made three fresh arrests in connection with its money laundering probe against Chinese smartphone-maker Vivo and some others.
• The three have been taken into custody under the provisions of the Prevention of Money Laundering Act (PMLA).

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.
• These facts point to Beijing’s growing hunger for data and secrets.

What were the 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.

What is the modus operandi of these entities?

• Hundreds of small companies controlled by Chinese nationalshave 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.

Chinese Commercial Entities: Threat for India’s Internal Security

• Access to personal data of Indians
  • Investments by Chinese companies such as Alibaba and Tencent were used to manage and control Indian companies which had a repository of large set of 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.
• Espionage and money laundering
  • Small-size shell companies were also used as financial conduits to fund espionage rings and resident agents.
  • 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
  • The Intelligence Bureau created a new wing — China Coordination Centre — to collaborate with financial enforcement agencies to investigate Chinese companies.
  • The 57^th Director General of Police conference, held in January 2023, discussed the issue of influence wielded by Chinese commercial firms.

News Summary: Chinese Commercial Entities and India’s Internal Security

Vivo – India Case

• ED filed the charge sheet against Vivo-India in the money laundering case on December 7, 2023.
• In this charge sheet, the Chinese smartphone maker was listed as the prime accused in the case.

Allegations made against Vivo – India

• Siphoned off $13 billion from India
  • In October 2023, the Enforcement Directorate told a court that Vivo had siphoned off $13 billion by hiding their profits for several months.
• Visa manipulation
  • The agency also said that many people affiliated with Vivo concealed their employment while seeking visas for India.
• Employees of Vivi breached the rules
  • ED said during court proceedings that some employees of Vivo breached rules by visiting the sensitive Himalayan region of Jammu and Kashmir.

Q1) What is Prevention of Money Laundering Act (PMLA)?

The Prevention of Money Laundering Act (PMLA) is an Indian law that was enacted in 2002 to prevent money laundering and to confiscate property derived from money laundering.

Q2) What is Enforcement Directorate (ED)?

The Enforcement Directorate (ED) is a law enforcement agency in India that investigates and prosecutes economic crimes, such as money laundering and financial fraud. The ED is administered by the Department of Revenue under the Ministry of Finance. 

Source: ED arrests three more in money laundering case against Vivo-India, others | Hindustan Times | The Economic Times