Outside of China, the main market for the giants Alibaba, Tencent or ByteDance – the owner of TikTok – to expand is India. It is not the most succulent region by revenue, but it reaches 500 million smartphone users, only behind China. And the growth is dizzying: by 2022 the number is expected to rise to 700 million users, according to analyst Counterpoint Research.
But the Indian government is trying to halt this expansion in its tracks. Last June it banned 59 Chinese apps throughout the national territory. These included some very popular ones, like TikTok or WeChat. Now, in another forceful move, the Narendra Modi executive has vetoed another 118 apps from the neighboring country. On this occasion, applications such as the Baidu search engine, the PUBG Mobile video game (from Tencent) or Alipay (Alibaba’s digital payment service) have fallen.
The justification, as has happened in the confrontation between the Trump Administration and Bytedance (and with China in general), has been national security. The Indian Ministry of Electronics and Information Technology has pointed out that the activities of the banned applications were detrimental to “the sovereignty and integrity of India” and to “public order”. In May, the relationship between the two neighbors was strained on the border they both share in the Himalayas. The conflict resulted in skirmishes by both armies, one of which caused the death of 20 Indian soldiers.
“This is read in terms of retaliation for border tensions,” says Mario Esteban, principal investigator for Asia-Pacific at the Elcano Royal Institute, on the ban on applications. “There are Chinese companies in the digital realm that have a presence in India, but there are hardly any Indian companies with a digital presence in China.” It is a first reading of an economic nature. “There is another reading that has greater geostrategic depth, which has to do with the bipolarization of the digital world, the separation between two digital poles, the American and the Chinese,” says Esteban.
A reflection of this fight is the conflict over TikTok in the United States, which the Trump Administration has given until September 15 before banning it. It will only be saved if a US company – Microsoft is the most likely candidate – buys the assets in the US India, on the other hand, does not seem to have any company willing to acquire TikTok’s operations in this country.
Precisely the movement of India against Chinese applications coincides in time with an approach of Silicon Valley to the country of the Ganges. This year several US tech companies have invested heavily in India. Amazon injected 1,000 million dollars into its operations in the country. While the operator Reliance Jio, the largest in India, has received a barrage of money. Facebook invested 5.7 billion dollars in it in exchange for a 10% stake, while Google took 7.7% for 4.5 billion. Intel and Qualcomm have also joined as investors, with 253 million and 97 million respectively. Reliance Jio would also be the best placed candidate to bid for TikTok’s operations in India, but its alliance with Facebook – which has just launched Reels to compete with the Chinese app – makes any acquisition plan difficult.
At the same time, all investment from China has been paralyzed by government order, fearing that the crisis generated by the pandemic will turn Indian companies into easy prey for Chinese capital. It should be borne in mind that in the digital sphere, Chinese companies had a large presence in India by themselves, but also as investors in startups. “Before India what I did was play both sticks. It’s not that India prioritized China over the United States, but that it was open to doing business with everyone, as long as there was business interest behind those relationships, ”Esteban explains.
Little by little, the closeness between the two countries and the voracity of the Chinese business giants have seeded the Indian digital market with influences from its northern neighbor. The Alibaba group has invested in Snapdeal, one of the main e-commerce sites in the country, as well as in BigBasket, an online supermarket, in the Patym payment app or in Zomato, for home delivery of food.
Tencent has diversified its capital among other Indian startups and companies, such as Indian Uber Ola, as well as food delivery and e-commerce companies. While other giants, such as the Chinese company Meituan Dianping, which covers a range of ecommerce services, or ByteDance have also injected millions into the country.
Not forgetting that the first smartphone brand in India is Xiaomi, with a 31% market share. Among the top 5 manufacturers there is only one that is not Chinese, Samsung, with just under 17% share.
The turn towards the United States
Chinese investment has flooded Indian tech companies in recent years. Last 2019 served to inject 8,000 million dollars and in 2018 the figure was around 6,000 million. In 2019 there were 12 unicorns (startups valued at more than $ 1 billion) backed by Chinese companies, with 8 backed by US capital, according to Indian investment firm Iron Pillar.
But the veto of apps marks a position for the future. “The signal that India is giving here is clearly that it aligns itself with the United States. This has very broad implications, because within the global competition that exists between the United States and China, the digital space is one of the main domains of confrontation, ”says the Elcano researcher.
The Silicon Valley giants have not always had an easy time penetrating the Indian market. In 2016, the Indian government vetoed Facebook’s Free Basics project, which sought to introduce restricted but free access to the Internet, for going against net neutrality. That same year Google was banned from implementing Street View based on national security.
The climate is very different now. Facebook is working with operator Reliance Jio on an initiative that integrates its JioMart e-commerce platform with WhatsApp. The goal is to connect consumers with local merchants, who sell basic and grocery products. Google’s plans are different in its alliance with the same company. The American giant wants to produce low cost terminals adapted to the local market, to attract the millions of users still without a smartphone in the country.
These are all signs of the side that India has chosen in the technological conflict between the United States and China. And they are also symptoms of the bipolar digital world towards which countries are moving.
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