Chinese app service providers in India to shed local jobs quickly
Published: Jul 09, 2020 08:28 PM

India Photo:VCG

Chinese app service providers hamstrung by India's ban could begin closing their offices and shedding local jobs in the country in a month's time, an industry insider told the Global Times Thursday. 

The comment came after the Indian Army reportedly ordered to ban 89 mobile apps starting July 15. The ban is a further step taken on Chinese apps after the Indian government made a decision to shut down 59 Chinese apps.

Apps developed by Chinese companies such as messaging app WeChat and the hugely popular short video app TikTok, and US apps such as Facebook and Instagram are affected.

Chinese tech unicorn ByteDance, owner of TikTok, said last week that it is anticipating a loss of $6 billion after three of its apps were banned in India. TikTok, with 611 million downloads in the first quarter this year, is already a behemoth in the industry. 

Chinese companies running other apps will also incur a loss from the outright ban, and a large number of companies may opt to close their offices in India and terminate local jobs because of the ban, in one to three months, an industry expert said. 

Game apps with developers based in China will see a loss of advertising revenue, but the hit for apps focusing on content production, which hired local jobs for localized production, will be higher. These companies were burning money in exchange for fast market expansion.

"Many of the small companies that were developing apps in India will face an abrupt cut-off of revenue," said Richard Ma, an industry insider.

"Many Chinese start-ups, in their early financing rounds, are hurt hard as they had never thought of a backup plan for the sudden Indian ban," Ma told the Global Times. 

"The third quarter will be a watershed. If there are no signs the ban will be lifted in one month, in a couple of months we will see an exodus of the app service providers," Ma said. 

Experts expect a wave of job layoffs from India's ban on Chinese apps, which is deemed part of a broader crackdown on Chinese businesses following a recent border clash in the Galwan Valley. 

Sha Jun, executive partner at the India Investment Services Center of the Yingke Law Firm, told the Global Times Thursday that apps banned by India would suffer at least $10 million in loss on average, and for large operators like TikTok which has a high user base in India, the loss would be too high to calculate.

"Losses include fixed expenses, defaults and missed business opportunities as well as a plunge in market value," Sha said.

How long Chinese companies will last in the market with the ban in place will be closely watched, experts say. 

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