India and China in a tech nationalism tug-of-war

The clouds have returned to the Sino-Indian sky, making the horizon even grayer for the relations between the Elephant and the Dragon. On November 24, New Delhi launched another round of bans on Chinese mobile applications, in a move that Beijing did not appreciate. In particular, following a report by the Indian Cyber Crime Coordination Center, 43 additional applications were considered “a threat to the sovereignty and integrity of the country, as well as to state security and public order“, according to the Indian Ministry of Information Technology.

China, of course, condemned the decision, and Ji Rong, spokesperson for the Chinese Embassy in India, made harsh comments, stressing that Beijing is firmly opposed to “the Indian side’s repeated use of national security as an excuse to prohibit some mobile apps with a Chinese background“. These words, indirectly, invite to open (once again) a Pandora’s box, which is filled with all those elements that make China and India compete in different sectors and markets in a race towards the acquisition and expansion of a greater sphere of influence in the region. This is then also reinforced by a certain degree of nationalism characteristic of these two nations when they feel that their position may be undermined.

Already in June, and then in September, respectively, 59 and 118 mobile applications developed by Chinese companies were targeted by the Indian authorities, in the context of bilateral relations that recorded high levels of tension with the clash of the two countries in the Himalayas, where 20 Indian soldiers lost their lives. What happened during the hot summer, however, was only one piece in a much more complex mosaic that defines the two countries’ current rivalry.

At the moment, taking into account the apps already banned in recent months and those that were added earlier last month, we can see how important Chinese players have been affected – from ByteDance, to Alibaba and Tencent. Alibaba, in particular, has seen the blocking of AliSuppliers, AliExpress, Alipay Cashier and other apps that have lost ground in the rapidly growing Indian digital market. But ByteDance’s popular TikTok app also faced the same challenge in being banned in a market where, according to Business Insider analysts, it could reach a base of 124 million active users this year.

Interestingly, China has occupied an important position within India in recent years, and this is particularly evident when analyzing the technology sector. According to a report published by the think tank Gateway House in February, China has entered the Indian market since 2015 through significant investments in start-ups, mobile devices and apps. More precisely, as reported in the document, Chinese investors in the technology sector invested $4 billion in Indian start-ups in 2019, with Alibaba, Tencent and ByteDance leading the way to seize the opportunity this country represents. These technology giants, along with other Chinese companies, have funded 92 Indian start-ups including Paytm, Byju’s, Oyo and Ola. In addition, the think tank found that 18 of the 30 Indian unicorns have a Chinese investor.

With such a level of penetration into India, the latest moves to ban Chinese apps take on nuances, which link the ban to India’s desire to avoid the risk of depending on Chinese funds in such a critical sector, but also to wider geopolitical dynamics. As a result, the impact of Sino-Indian competition translates into the realm of business, where companies become vehicles or targets of political pressure. Thus, to a certain extent, these business actors – on both sides – will certainly continue to face uncertainties when they draw on the boundaries marked by a chain of actions and reactions triggered by a deep-rooted regional competition. Whether this chain can really lead to the declaration of some winners remains to be seen, however, in the long term, it could essentially damage Chinese companies.

A dear Indian friend, who has a deep knowledge of the technology sectors in India and China, recently told me: “Considering the importance and size of the Indian market, it will be a disadvantage for Chinese companies in the short and long term. India, on the contrary, could face challenges in the short term, but internal innovation will then lead to new solutions developed within our country. Other external players may also play a role in the development of these solutions. For example, the United States, as we have seen with the investments made by American companies in Reliance Jio platforms“.

In July, Google’s CEO, Sundar Pichai, confirmed that the research giant plans to invest $10 billion in India over the next 5-7 years, supporting the digital business revolution and spreading the use of emerging technologies in critical areas. Google, in particular, has identified an opportunity in Reliance Jio platforms, joining the path already followed by Facebook, Qualcomm and Intel and further positioning American companies as important players in the construction of “Made in India” tech giants. Reliance Jio is only 4 years old, but with its 400 million subscribers it is the largest telecommunications platform in India. Founded by Mukesh Ambani, it has already attracted the attention of foreign investors, demonstrating its contribution to Digital India‘s vision with 5G solutions, intelligent devices, artificial intelligence, blockchain and big data analytics. In November, the Competition Commission of India (CCI), the national antitrust authority, approved Google’s $4.5 billion investment in Jio, enabling the two companies to collaborate on the development of low-cost, customer-oriented mobile operating systems and new smartphones.

New Delhi is firmly committed to transforming India into a digitally empowered society and knowledge economy. Several players – mainly from China and the United States – will seek to play a role in this area, mitigating risks and identifying opportunities, focusing not only on what India is today, but rather on what it could potentially become tomorrow. The development of these dynamics remains extremely relevant.

Picture credits: Associated Press / VietnamBiz.vn