Fraudulent Chinese firms swindle Indians in six innovative ways

Alarmed by the growing instances of fraud being committed by Chinese companies, to which Indian small and medium firms are falling victim, New Delhi has swung into action and has — for the first time — done an analysis on the types of trade disputes.


The government has also cautioned Indian companies against trusting business-to-business (B2B) sites before zeroing in on a Chinese partner. It has also asked the Indian missions in that country to help in establishing the authenticity of Chinese firms. There have been 66 disputes this year alone between January and July, the value of which exceeds $1.8 million. A majority of the disputes have taken place with companies based in Hebei province (29 cases) and Tianjin municipality (26 cases). The government is also circulating a list of 48 companies that committed fraud this year.

According to sources, the ministries of external affairs and commerce have analysed the cases, and have issued an advisory that identifies six ways in which fraud is being committed.

They are the following:

TYPE 1: A Chinese company gets in touch with an Indian company and invites the latter to visit China and meet company executives and local government officials as a confidence-building exercise. Before the Indians leave for China, the Chinese ask for cash towards gifts for local officials citing cultural values, to which the Indians agree. The Chinese pull out all stops and once the Indians return, all communications go unreplied. The Indian company loses on costs of transportation, accommodation and the gifts.

TYPE 2: The Indian firm finds a Chinese exporter from B2B portals and other online sources. The exporter insists that the Indian company should send a percentage of the total amount as advance. After payment, the Chinese firm reneges on the commitment.

TYPE 3: The Indian company finalises the deal and asks the Chinese for a sample of the products, which meet the desired standards. Orders are placed and the advance paid. The consignment reaches Indian shores and the payment is released after inspecting the bill of loading. The actual product, seen after release by Customs, is found to be substandard or at variance from the agreement. The Chinese brush aside all complaints and blame extraneous conditions.

TYPE 4: The Indians and the Chinese agree that the buyer (Indian) has to make an advance payment for the consignment. Once the advance is received, the Chinese partner goes slow and after repeated requests, asks for the remaining payment and cites delays, increased costs, supply problems, and even threat of no dispatch to exact the sum. The Indians pay up and the Chinese renege.

TYPE 5: The Chinese company, before or after finalisation of the deal, insists on `Notarisation of the Agreement’, cost of which has to be shared equally by both parties. The Indian company duly pays up its share. On return, the Indians are asked to pay extra towards ‘increased’ notarisation fees. The Indian firm risks losing its share of notarisation fees if it does not pay and the total amount if it pays up the extra fee.

TYPE 6: Before finalising the negotiations, the Indians receive an instruction to transfer the advance/full amount in a bank account different from that of the Chinese company. They comply and there is no answer after the amount is received. Later when the whereabouts of the consignment is enquired into, the Chinese respond that the said account is not the company’s account, or that the employee left the firm.