UPDATE 1 – Ban on Chinese apps will hurt Indian start-ups, deter Chinese investment: analysts

By GT staff reporters Source:Global Times Published: 2020/6/30 12:31:44 Last Updated: 2020/6/30 15:31:44

Tik Tok Photo: IC

Analysts say the Indian government's ban on 59 apps developed by Chinese companies will eventually hurt India's technology and internet start-ups when they lose Chinese investment. 

On Monday evening, India's government announced it would ban 59 Chinese 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. 

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 "it marks a very bad signal for further Chinese investment in India." 

The presence of Chinese investors in India's high-tech start-up ecosystem has secured the country a significant standing in recent years not only due to funds brought to the emerging market but also due to the provision of cutting-edge technologies and rich experience to scale up businesses.

For India, cutting Chinese influence from its market is difficult, as Chinese tech companies are betting high on India's rising tech scene. 

By the end of 2019, more than half of India's 31 unicorn companies had been invested in by Chinese tech giants Alibaba and Tencent, according to the Iron Pillar Fund, a fund management company in India. 

Companies backed by Chinese capital have spread across the business spectrum, from online payment platform Paytm and delivery platform Zomato to ride-hailing companies like Ola.

Chinese non-financial investment in India grew 9.7 times from 2020-18, according to China's Ministry of Commerce. Investment in technology stood out with total investment surpassing $8 billion. 

As a result, targeting Chinese-backed apps would mean a heavy blow to the Indian start-up ecosystem, analysts warned.

ByteDance's TikTok, which sees India as its biggest overseas market, is among the apps now banned. It has generated more than 600 million downloads in India as of April 29, accounting for about 30 percent of its total global downloads, according to mobile app market research firm Sensor Tower. 

TikTok said it has been invited to meet with concerned Indian government stakeholders for an opportunity to respond and submit clarifications. 

"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.

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, has also been banned. Tencent's WeChat, QQ Music and QQ Player have all been included on the list of banned apps.

"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 noted the ban would eventually become "a mere scrap of paper" as these apps have already become ingrained in Indian people's lives and will therefore be difficult to remove. 

Though abundant tech talent comes from India, many choose to work in Silicon Valley, resulting in a domestic shortage of talent. 

Zhao said that if the Indian government does not have sufficient capital to support the development of domestic tech start-ups and talent, it would be impossible to oust Chinese companies from the market. 

Zhou Rong, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, added that the policy is aimed at addressing the anti-China sentiment that has arisen from a recent border clash between the two countries, 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 would be a difficult process that involves multiple internet service providers," Zhou said. 

More notably, removing Chinese apps would leave a vacuum in the Indian market, creating room for unofficial apps which could lead to even bigger security risks, he warned. 

Tencent and UC had not responded to the Global Times' requests for comment by press time.


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