What information did India reveal when it announced it had banned 59 Chinese apps?

On June 29th the Indian government’s information technology ministry announced the closure of 59 Chinese apps, including the overseas version of Sound, Quick Hand Overseas, WeChat, QQ and 59 apps from Chinese companies, citing “undermining India’s sovereignty and integrity, India’s defence, national security and public order”.

As of Caijing’s press release, Helo and TikTok have been down in major app stores in India, and other apps, including Vigo ,volcano video overseas, are temporarily available for download and use. India’s official announcement also did not say how the apps would be banned or what the specific time of the ban would be. In addition, the Indian government’s restrictions on Chinese internet companies have yet to affect Chinese capital, such as Paytm, a Chinese-backed Indian payment app, and Zomato, the takeaway software, which have yet to appear in the ban.

A senior Indian official told India’s Economic Times, speaking on condition of anonymity, that the banned Chinese apps have been around for a long time and have privacy and security issues. He also stated that the Indian government had considered all aspects before making the decision.

In response to India’s recent announcement to block 59 Chinese apps such as WeChat and Shiyin, Chinese Foreign Ministry spokesman Zhao Lijian responded on June 30 that China is deeply concerned about the Indian announcement and is learning about the verification, and that the Chinese government has always asked Chinese enterprises to cooperate with other countries on the basis of compliance with international rules and local laws and regulations, and that the Indian government has the responsibility to safeguard the legitimate rights and interests of international investors, including Chinese enterprises, in accordance with market principles. The cooperation between China and India in the field of practical cooperation is mutually beneficial and win-win, and the pattern of this cooperation is artificially damaged, which is not in the interests of India itself.

Tencent Group officials told Caijing that the incident will not be evaluated and responded to. As of Caijing, Byte Dance and Baidu and other related companies have not given Caijing reporters a formal response.

Li Jun, a veteran technology industry practitioner and observer, told Caijing that the Government’s restrictions on Chinese apps may include but are not limited to: no longer pre-installed when users buy mobile phones, and that users can download them only by switching accounts in other countries, he believes, most users will be stuck in the app store download link.

What information did India reveal when it announced it had banned 59 Chinese apps?

Chart 1: India’s Banned App List; Source: Indian Government Information Technology Department; Drawing: Liu Shuqi

The 59 Chinese apps on the list can be divided into three categories, one with a market base in China, replicated to Indian markets such as WeChat and Weibo, the second for Chinese companies to launch twin products for overseas markets, such as The Ixan iphyonics, and the third for Chinese companies that have grown up in the Indian market, such as the cross-border e-commerce company Club Factory, which is now India’s third-largest e-commerce platform after Amazon and Flipkar.

With the advancement of technology, the level of impact of information security on national security has been raised repeatedly. The European Union has repeatedly pointed out the data security implications of Internet companies. Almost all companies, facing similar allegations, emphasize the importance of data security, such as that all of the company’s data for specific users in the country is stored on local servers in the country and will not be diverted or misused.

Li Jun analysis, overseas market data is really unlikely to be transferred by the company, because the price is too low, data from the Indian user market for Chinese companies, the greatest value may be used for overseas market user data analysis.

In the global Internet and technology sector, the current driver is China and the United States, India and other emerging markets, the market space is huge, but the foundation is relatively lacking, lack of capital, in technology, operations and platform building capacity is not mature enough, need the support of external forces, but also open up opportunities around the world. India is considered the largest and most imaginative emerging market in the global technology industry.

The Indian government’s ban has dealt a short-term blow to Chinese technology companies and capital to varying degrees. In the long run, Chinese technology companies need to adjust further if they are to continue doing business in a country where there is a risk of policy variables.

Involved at least 650 million Indian users

Late at night on June 29, local time, a large number of Indians with business ties to China, as well as Chinese who need to contact Indian partners, sent out alternative contact information in WeChat’s circle of friends to avoid the adverse effects of WeChat being blocked.

It’s not just the users who are prepared to respond at night. One investor who follows the Indian market told Caijing that they sat through the night studying the companies on the list and calculated that the app had 650 million users in India. Behind the 650 million users, there are a large number of local Indian businesses and their employees who already advertise on these apps.

The government’s biggest impact is likely to be TikTok, the largest market for TikTok, a mobile app analytics firm, according to Sensor Tower, a mobile app analytics firm, which has more than 500 million downloads in India, accounting for more than 30 percent of TikTok’s total users.

In September 2019, UC Browser released data that said it had more than 430 million users worldwide, with India as one of its main markets, with more than 130 million users. UC browsers account for more than 23 per cent of the mobile browser market in India, second only to Google Chrome, according to StatCounter, a third-party data analytics firm.

ByteDance’s Helo is a social media platform that offers 14 Indian languages, and in July 2019 Helo said it had more than 50 million monthly active users.

In June, Fast Hand’s Kwai stopped operating in India, importing UVideo, another of its short video apps, to more than 50 million downloads on the Google Play store.

The aforementioned investors, who do not want to be named, judge that such a large user body, a long-term blanket ban is not realistic, and that many of these apps are currently in the Indian market there are no mature alternatives. The stakes aren’t too much for technology companies.

From an investment perspective, however, he expressed strong concerns. He told Caijing that the move would be a “devastating blow” to China’s confidence in capital investment in India, and that “no one dares to go to a market where you can’t move and say they want to seal your market.” “

For the past two years, Chinese capital has been keen to invest in the Indian market. Chinese technology investors are expected to invest more than $4bn in Indian start-ups, according to a report released in March by Gateway House, an Indian global relations think-tank. As of March 2020, 18 of India’s 30 unicorn companies have investors from China.

(Chart 2: The Chinese management behind the Indian Unicorn company. Source: Gateway House, India’s global relations think tank

What information did India reveal when it announced it had banned 59 Chinese apps?

Byte Dance has been trying to spin off Tik Tok from China. On May 19 this year, Byte Dance announced the appointment of Kevin Mayer, a former Disney executive, as Chief Operating Officer of ByteDance and Chief Executive officer of TikTok Global, “one of the main purposes of inviting Kevin to open up TikTok’s overseas government relations and operate independently.” “

The banned list also includes three game apps, Beijing Smart Star Tong’s “The King’s Dispute,” Mu’s Endless Duel, and hago Play With New Friends, a small-game social app. However, pubG MOBILE, currently india’s most popular game, also known as “chicken”, is not on the list. PUBG MOBILE has more than 100 million downloads in the Indian market, making it the highest mobile game in India, according to App Annie, a third-party data agency.

A senior industry source to Caijing reporter analysis, did not put “PUBG MOBILE” on the banned list, probably because the game’s research and development team is a Korean company, Tencent is only the issuer. Another possibility is that the ban is only the first, and that there may be a second and third. Some of Tencent’s game anonymous business people believe this may be because Tencent has specifically made compliance with the Game for the Indian market.

Liu Xiaoxue, deputy director of the South Asia Research Center of the Chinese Academy of Social Sciences, who has long focused on the Indian economy and Chinese companies investing in India, told Caijing that India is losing money on the border but is trying to calm domestic sentiment, so the introduction of such a symbolic ban that is more symbolic than practical means suggests that India does not want to take tough measures against China.

Chen Kaifeng, chief economist at Huisheng Financial, said the current moves by the Indian government suggest edimen to cut with China and “India may nationalize Chinese investment in India.” “

Not only mobile apps, but the Indian government has recently delayed customs clearance of Chinese imports. Starting on the evening of June 22nd, the Indian port of Chennai will carry out a 100% inspection of all goods from China (previously a spot check) for additional customs clearance materials. The port of Chennai is an important port for telecommunications components and equipment, from which many Chinese companies enter the Indian market.

India’s move not only hurts Chinese companies, but also angers U.S. companies. Products from Us companies such as Apple, Cisco and Dell have also been implicated, with the US-India Strategic Partnership Forum (USISPF), a lobby group representing US companies, writing to India’s Commerce Department on June 23 to say India is sending a worrying signal to foreign investors seeking predictability and transparency.

In April, India introduced administrative regulations to protect against foreign investment, requiring that investments from “bordering” countries be subject to prior review, a move widely seen as aimed at China.

Li Qin, an adviser to Linklegal, an Indian law firm that works on Chinese companies’ investment law in India, said delays in many Chinese investors’ projects had had a negative impact, and the Indian government had even instructed its embassies and consulates in China to interview investors, much to the chaking of many Chinese investors. He told Caijing that India, as an emerging market country that implemented its policy of opening up to the outside world in 1991, still has a long way to go for its government and people’s understanding of foreign investment.

How can Chinese companies avoid long-term risks?

In 2019, a Chinese investor visited India and recalled sitting at least 10 Chinese investors in a cafe in India, recalling the scene, which he said was “very much like Zhongguancun.” “

SoftBank Group CEO Sun Just has proposed the “time machine” theory, the opportunities and models that developed markets have validated, will re-emerge in emerging markets. Some Chinese entrepreneurs and investors have invested in the Indian market with such confidence that they have acquired a “God’s perspective”.

But “God’s Perspective” has not been easy either, with some start-ups trying to replicate a “today’s headline” in India in 2018, which quickly disappeared, with many mobile phone users in India having their information needs met by Facebook and few advertisers willing to do paid marketing on news aggregation platforms.

Back today, verified models such as TikTok, Facebook, Instagram and Youtube are welcome for Indian users, but they all face a conundrum : traffic realisation.

A number of investors to Caijing reporter confirmed that although the Indian market has a large number of users, but the overall willingness to pay is very low, only slightly higher than Africa, many companies in India have a good number of users, but can not make money.

But opening up the Indian market is still valuable. As a country of 1.324 billion inhabitants, it is rare for India’s Bureau of Statistics to show that average annual GDP growth will be more than 6% by 2019 and down to 5% in 2019, a large, fast-growing market. In addition, if we can win the Indian market, it will be better able to open up other emerging markets.

India, on the other hand, wants outside capital to enter the country. In its latest World Economic Outlook report on June 24th, the International Monetary Fund slashed its growth forecast for India, which is now expected to contract by 4.5 per cent, compared with a previous forecast of 1.9 per cent.

The low employment rate is a major problem in India, with the Economic Monitoring Centre (CMIE) reporting that employment was 38.2 per cent in March, the lowest on record, and the unemployment rate has reached 8.7 per cent, the highest level since September 2016.

At present, the Chinese and Indian governments have started consultations on the cooling of border frictions, and the situation is moving in a positive direction. But border friction has turned into resistance to Chinese products in India.

A person who runs a mobile phone accessory production in India told Caijing that stores selling Chinese mobile phones have covered the brand logo with Made in India. Another Chinese mobile phone company in India also mentioned that many stores, although opened by local distributors, are also worried about being smashed.

Some people interviewed by Caijing predicted that the Indian government will not impose a ban on the mobile hardware industry for the time being. Chinese handset makers, including Xiaomi, OPPO, Vivo and Realme, already account for more than 70% of India’s mobile phone market, and there is no local Indian brand to replace.

Moreover, these handset makers have already set up factories in India, and the assembly process is mostly done in local factories, driving employment in India.

A vivo source in India told Caijing that Chinese mobile phone manufacturers are the first commercial force to enter India, so the localization of these mobile phone manufacturers are doing well, the daily business personnel are Indian, the problem can be solved as soon as possible.

This does have some advantages over Chinese internet companies that have not yet yet been able to localize the Indian market. “Apps are banned and you probably don’t know who’s going to solve the problem. “

Respondents, including Li Jun, believe that Chinese companies want to develop their overseas business independently, at least to achieve personnel cutting, data cutting, business operations cutting, IT system cutting, leaving only financial links, the future financial links should also be as weak as possible, the introduction of local strategic investors, share profits, in government relations can also help.

Mr Li’s view is that, given China’s basic influence, the Indian government is less keen on Chinese investors to go it alone in the Indian market, but rather in a deep-binding approach to some of India’s partners. In the case of Internet products such as apps, India wants China to invest in its own apps.

For industry, India wants China to find local joint ventures, deep binding, and reduce the autonomy of Chinese investors, only then India can rest assured. Chinese companies are hard to accept, and they find it very difficult to find suitable and reliable co-ventures.