China and India’s trade and technology ties are at risk as border dispute increases

China and India's trade and technology ties are at risk as border dispute increases

Gateway House estimates that Chinese investors have poured $ 4 billion in Indian technology initiatives since 2015.

Ali Dad (FATHER)For example, Indian e-commerce company Snapdeal invested in digital wallet Paytm and food delivery platform Zomato. Tencent (TCEHY)Meanwhile, the Indian messaging company Hike and greetings app supported Ola ride. Gateway House found More than half of India’s 30 unicorns – private firms worth more than $ 1 billion – are Chinese investors.
And Huawei is still working to build 5G networks in India fast growing internet The economy, despite a US-led campaign against the Chinese company.

“China hoped to be the dominant player in this internet market,” says Amit Bhandari, a Gateway House member and co-author of the report.

According to Sukanti Ghosh, president of the Washington-based think tank Albright Stonebridge Group, India is also key to China’s goal of becoming a dominant force in global technology.

“I do not believe that anyone is a loser in this relationship, both countries have been won considerably.” “China is linked to the Asian domination strategy and its increasing competition with the United States,” Ghosh said.

But earlier this year, India signaled that China was taking steps to prevent its growing influence. In April, the government announced that foreign direct investments (FDI) from countries sharing land borders with India will be subject to further scrutiny..

Analysts say the new rules are uncertain. For example, Bhandari said investments in social media platforms that will ask questions about data storage and privacy will get more scrutiny. The government said the rules are aimed at preventing opportunistic acquisitions and acquisitions of Indian companies struggling with the fallout of the Covid-19 outbreak.

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They also seem to have been planted in China.

Pakistan, According to Bhandari, the arch rival of India will not invest in India in any way and it is not known that other countries that share the border with India have made small and large investments.

“It was aimed at China, but not directly,” he said.

Bhandari said that the tightening of FDI rules is a message that Chinese firms can still export software and hardware to India, but they cannot dominate India’s internet ecosystem.

Basically, “China will not have free movement in this market,” he said.

Government policy was initially skeptical by some people in India’s technology industry. Then, in May, the cross-border conflict between the Chinese and Indian forces caused minor injuries to the troops.

The incident was the last of a long border flares in a mountainous crossing close to Tibet and led to a new anti-Chinese sentiment in India. Tensions have increased significantly on Tuesday, when at least 20 Indian soldiers were killed during a clash with Chinese troops.

Reorienting China’s influence

China draws negative attention.

The state-run tabloid The Global Times said in an article India’s move to tighten FDI rules shows that “the Indian government has been kidnapped by anti-Chinese insights from China,” released earlier this month.
Tabloid also criticized the latest app that has been downloaded by millions of people in India and promises to help “Uninstall Chinese Apps” Brush Chinese software on your smartphones. Google (GOOGLE) pulled from the app store earlier this month because it violated the terms.

“If India allows narrow-minded nationalism to spread to science and technology, it will certainly harm its own interests,” said Global India.

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Google uninstalls app claiming to detect Chinese apps on Indian phones

According to a Brookings India report published in March, Chinese companies are trying to establish a long-term asset in India, and their investment in Indian companies gives them a permanent share in the market.

“I don’t think it’s a common understanding of how difficult it can be to completely reduce India’s dependence on China,” said Ananth Krishnan, a former Brookings India member and report author of the report. Said.

Krishnan, currently a reporter in the Hindu newspaper, India trusts everything “from heavy machinery to all kinds of telecom and power equipment to active pharmaceutical ingredients”. In the Brookings report, Krishnan estimated that the current and planned total investment from China to India is at least $ 26 billion.

According to the Indian Ministry of Commerce, trade between the two countries reached more than $ 87 billion in the 2018-2019 fiscal year. China was India’s second largest trading partner just behind the United States that year.

But the relationship is one-sided. On the other hand, China exports much more to India.

“These are structural dependencies that the boycott campaigns really did not address,” he said. Said.

Krishnan said that the recent tightening of FDI rules is not intended to stop China’s investment in India, but rather “in areas where Chinese investment will be more beneficial to India – [manufacturing] facilities and job creation. “

Cutting China could mean job loss for Indians

Chinese smartphone manufacturers created factories and created jobs in India.

The emergence of India as the largest overseas market for Chinese mobile phone companies is one of the most important developments in China’s relations with India in the past five years.

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According to market research firm IDC, four of the five best-selling smartphone manufacturers in India last year were Chinese: Xiaomi, Vivo, Oppo and Realme. Samsung, South Korea’s only non-Chinese brand, ranked 2nd.

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According to IDC, India sales of these top Chinese smartphone brands amounted to more than $ 16 billion in 2019.

And they all have production facilities in India. Doing this allowed Chinese firms to both adopt Prime Minister Narendra Modi’s “Do it in India” program and avoid hard import tariffs. Xiaomi produces 95% of the phones it sells in India locally.

“So if you are talking about reducing sales or shipment of these guys, it also affects factories in India,” said IDC analyst Kiranjeet Kaur.

He added that the campaigns calling on Indians to boycott Chinese goods have already taken place during border clashes. But they never paid attention to the sale of Chinese smartphones in India.

Even if this is the reason Many Indians swear to cut Chinese hardware and software, “I really don’t think they will change their purchasing decision,” said Kaur.

“They are so dependent on Chinese telephone ecosystems that there is no other choice.”

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About the Author: Abbott Hopkins

Analyst. Amateur problem solver. Wannabe internet expert. Coffee geek. Tv guru. Award-winning communicator. Food nerd.

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