Leading Chinese electronics manufacturers operating in India, including smartphone giants Oppo and Vivo, are increasingly relying on financial support from their parent groups to sustain their local businesses. This shift comes as these companies face significant hurdles in securing traditional bank loans and equity funding from their headquarters, primarily due to regulatory roadblocks.
The PN3 Roadblock and the Shift to Group Borrowings
At the heart of this funding challenge are the Press Note 3 (PN3) rules introduced in 2020. These regulations mandate that companies based in neighbouring countries, including China, must obtain prior government approval for any fresh equity investment into India, closing the earlier automatic foreign direct investment route. With these approvals largely stalled, Chinese firms have seen their primary funding channel dry up.
Compounding the issue, regulatory actions by Indian agencies investigating compliance with tax, customs, and foreign exchange laws have made domestic banks cautious about lending to these entities. "In the immediate years after PN3, Chinese companies were struggling with funding as equity capital dried up," a senior executive from a major Chinese brand told ET. "This made local bank loans a challenge. So, ECB has become the favoured route."
How Major Brands Are Navigating the Crunch
Filings with the Registrar of Companies reveal a clear pattern of dependence on External Commercial Borrowings (ECBs) from related overseas parties.
Lenovo provided an unsecured loan of Rs 300 crore in FY25 to its group firm Motorola Mobility India to meet working capital needs.
Haier Appliances India borrowed Rs 214 crore in FY25 from its Singapore-based holding company for business requirements. The company has also informed the government that it needs PN3 approval for a fresh Rs 1,000 crore equity infusion to set up a third factory. With approval pending, Haier is exploring a potential stake sale in its India unit to the Bharti Group to finance the project.
Midea India secured an overdraft facility backed by a comfort letter from its Chinese parent. Its long-term ECBs from a Singapore-based group entity stood at Rs 448 crore as of March 2025.
In the smartphone sector, Vivo Mobile India reported using ECB proceeds for working capital and capital expenditure. Its ECB exposure was Rs 1,668 crore in FY24, down from Rs 2,875 crore the previous year.
Oppo Mobiles India received a significant non-current ECB worth Rs 1,667 crore in FY24 from a Hong Kong-based group company, Grand King Ltd, alongside a bank loan.
Broader Impact and Market Dominance Amid Challenges
The funding constraints extend beyond borrowing. Xiaomi disclosed that a substantial sum of Rs 4,820 crore belonging to its India subsidiary remains frozen in bank accounts by authorities, with cases ongoing.
Despite these pronounced financial and regulatory headwinds, Chinese brands continue to hold a commanding position in India's crucial smartphone market. Recent data from IDC India indicates that eight out of the top ten smartphone brands in the country are Chinese, with only Samsung and Apple as exceptions. This underscores their deep-rooted presence and consumer appeal, even as they navigate a complex funding landscape shaped by policy shifts and heightened scrutiny.
