India-China Border Conflict Spells Bad News For 59 Chinese Apps, 18 Indian Unicorns

India bans 59 Chinese apps, severely restricts Chinese investment from entering the country

The India-China border conflict has spilled over into business relations between the two giant Asian economies, with the Indian government undertaking a series of moves including banning 59 Chinese apps from the subcontinent.

In a press release dated 29 June 2020, the Government of India announced that it has banned 59 Chinese apps. The list includes TikTok, which has been incredibly popular with Indian users, and especially with its rural demographic.

Citing security concerns over data and privacy, which “pose a threat to sovereignty and security” of the country, the Indian Government has disallowed the use of the 59 Chinese apps.

Apart from TikTok, other apps that have made it to the list include ShareIt, Baidu Map, Helo, Newsdog, Weibo, Cam Scanner, Meitu, UC Browser, and in a huge disappointment for the gaming community, Clash of Kings as well.

Indian Prime Minister Narendra Modi’s Weibo account was also taken down (though reports are conflicting on whether Mr Modi or Weibo deleted the account). Mr Modi had joined the Chinese microblogging site in 2015, prior to his first courtesy call to China as Prime Minister.

Prior to the ban, TikTok, ShareIt, Helo and UC Browser were some of the most downloaded apps amongst users in India.

In response, spokesperson at the Chinese embassy in New Delhi Ji Rong said in a statement that the ban could impact both local Indian workers hired by the app companies, and the “interests of Indian users and the employment and livelihoods of many creators and entrepreneurs,” Livemint reports.

Indian users face massive concerns over data security and privacy not only from Chinese apps as stated by the Government’s official statement, but from scores of other apps including Zoom and Facebook. This is because the country has no enforced data protection laws at all.

While the Government has introduced a Personal Data Protection Bill in December 2019, the bill purportedly gives the Indian government greater control over user data and provides for loose regulation over data localization in the country.

On the heels of the ban, top Indian officials are reportedly in talks to ban Chinese companies including Huawei and ZTE from participating in its 5G trials, after Indian state-owned telecommunications companies were told not to source equipment from the two Chinese companies.

Bharat Sanchar Nigam Ltd., a government-owned telco, has also cancelled its 4G upgradation tender and will be issuing a new tender in the coming weeks. The move reportedly took place to soft-ban Chinese companies from participating in the tender.

The trade conflict has not spared Indian micro, small, and medium enterprises (MSMEs). Indian Union minister Nitin Gadkari announced that the government will “not entertain” Chinese investments in Indian MSMEs, in addition to announcing other foreign direct investment (FDI) strictures pertaining to Indian highways.

“For upgradation of technology, research, consultancy and other works, we will encourage foreign investment and joint ventures in MSMEs but in case of Chinese we will not entertain them,” he told the Press Trust of India.

These tightened rules come after a scuffle in the Galwan Valley, located at the Indo-China border, where 20 Indian soldiers and Chinese soldiers (neither country has revealed how many) lost their lives in a faceoff last month.

Trade tensions between the two countries have been mounting. Earlier in April, the Government of India revised its FDI rules to state that companies in countries that share borders with India can only invest in Indian companies through the Government, another move reportedly targeted at Chinese companies.

Considering that Chinese investors have pumped crucial monies into the Indian startup ecosystem, these moves do not bode well for them.

Several Indian unicorns such as Paytm’s One97 Communications, Byju’s, Flipkart, and Swiggy feature in the portfolios of major Chinese investors such as Alibaba Group, Tencent Holdings and Xiaomi.

Only recently, Indian food delivery app Swiggy recently raised US$43 million in a Series I led by Tencent.

While the total pool of funding received by Chinese investors in Indian startups is relatively small at $3.9 billion as of 2019, it is worth noting that 18 of India’s 30 unicorns are backed by a Chinese investor, putting their future in a possibly precarious position.

The news also comes at an extremely unfavorable time for other Indian startups and MSMEs. More than a quarter of these companies have already run out of cash due to the Covid-19 pandemic, and nearly half estimate that they will not be able to make it much longer.

Header image by Ishant Mishra on Unsplash

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