India’s move against Chinese firms will hurt start-ups, deter investment
Analysts said that the Indian government’s ban on 59 apps developed by Chinese companies will hurt India’s technology and internet start-ups as they lose Chinese investment.
On Monday, India announced it would ban the apps over national security concerns. “The compilation of these data, its mining and profiling by elements hostile to national security and defense of India, which ultimately impinges upon the sovereignty and integrity of India, is a matter of very deep and immediate concern which requires emergency measures,” read the statement, which came after the latest standoff between China and India.
China is very concerned about the move and is verifying the situation, Foreign Ministry spokesperson Zhao Lijian told a press conference on Tuesday, adding that the Indian government has a responsibility to safeguard the legal rights and interests of Chinese firms.
Practical bilateral cooperation has been mutually beneficial, but is now suffering manmade damage, which does not conform to India’s own interests, Zhao noted.
Sha Jun, executive partner at the India Investment Services Center of the Yingke Law Firm, told the Global Times on Tuesday that the Indian government’s behavior was “too childish and emotional” and “a very bad signal for further Chinese investment in India.”
Chinese technology companies are betting big on India’s rising technology scene, so reducing their influence will be difficult. Their support for Indian start-ups has brought money, cutting-edge technologies and experience in scaling up businesses.
Chinese non-financial investment in India grew 9.7 times from 2020-18, according to China’s Ministry of Commerce. Investment in technology surpassed $8 billion.
Most of India’s 30 unicorns (start-ups with valuations of over $1 billion) have Chinese investors, according to Mumbai-based think-tank Gateway House. Even if targeting Chinese-backed apps affects Chinese companies in India – despite their optimism toward the emerging market and its lucrative demographic dividend – the ban will damage Indian start-ups, analysts warned.
ByteDance’s TikTok, for which India is the biggest overseas market, is among the banned apps. The app had been downloaded more than 600 million times in India as of April 29, or about 30 percent of its global downloads, according to mobile app market research firm Sensor Tower.
“TikTok continues to comply with all data privacy and security requirements under Indian law and has not shared any information of our users in India with any foreign government, including the Chinese government,” read a Tuesday statement from Nikhil Gandhi, head of TikTok India, who added that the company places the highest importance on user privacy and integrity.
TikTok and another ByteDance app Helo have disappeared from Google’s Play Store and Apple’s App Store in India on Tuesday, while the Chinese firm’s Vigo Video still exists. Indian users who have already downloaded TikTok and Helo can still use them normally, according to Chinese media outlet LatePost.
The ban targets apps ranging from browsers to e-commerce, including three Alibaba Group apps: UC Browser, UC News and video platform VMate. Club Factory, which claims to be India’s third-largest e-commerce platform, was also banned.
Club Factory said in a statement sent to the Global Times on Tuesday that it abides by all rules and regulations in India. “We comply with all data security norms and have not compromised with the security or privacy of any users.
“Through our long-term presence, we have provided direct employment to hundreds of people in India and indirect jobs to third-party partners, including logistics and supply chain companies, warehouses, customer support agencies and more,” the company said.
Tencent’s WeChat, QQ Music and QQ Player were also on the list.
“These apps have provided great convenience to the lives and economic activities of Indian people. They play key roles in improving Indian society’s functional efficiency,” Zhao Jianglin, an expert on Southeast Asian affairs at the National Institute of International Strategy under the Chinese Academy of Social Sciences, told the Global Times on Tuesday.
She said the ban would eventually be merely on paper, as these apps are ingrained in Indian people’s lives and have created jobs.
Zhou Rong, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, said the policy is aimed at addressing anti-China sentiment arising from a recent border clash, but in the short run, the ban is too difficult to execute.
“The government has not explained in detail how the Chinese apps are threatening the security of India and, technically speaking, removing apps is a difficult process that involves multiple internet service providers,” Zhou said.
Removing the apps would leave a vacuum in the Indian market, leaving room for unofficial apps that might bring big security risks, he warned.
Although India has many talented technical staff, many choose to work in Silicon Valley, causing a domestic shortage.
Zhao said that unless India has the capital to support the development of domestic start-ups and talent, it would be impossible to oust Chinese companies.
The logo of TikTok application is seen on a screen in this picture illustration taken February 21, 2019. Photo: VCG
