Indo-China camaraderie in the digital world

Indo-China camaraderie in the digital world
Indo-China camaraderie in the digital world

China's substantial investments in Indian start-ups and its rapid dominance in the Indian smartphone and app market are testament to its potential as a fruitful digital partner going ahead, as long as the countries can navigate through the changes in data protection policies at both ends.

Highlights:
  • Chinese VC investment into India has grown five-fold in the past two years.
  • Another area where Chinese companies made big inroads in India is the domestic smartphone market.
  • Chinese Investment, while helpful to the Indian tech sector has also sparked concerns over big data and consumer insight.
  • A lot now depends on how stringent India's upcoming data protection law will be.
In 2018, venture capital funding from
into the Indian
surpassed those coming from traditional hot spots like the US and Japan. With an inflow of $5.6 billion flowing from across the Himalayas, China's VC investment into India had grown fivefold in just a matter of two years - up from a mere $668 million in 2016. To further put things in context, Chinese investments into India for 16 years till 2016 was worth only about $1.35 billion. Around $7 billion have come in between 2016 and 2018 alone. This flow of funds has been very helpful to the development of the Indian technology space, which is now flush with new ideas, innovations and breakthroughs. It would not be incorrect to say a lot of it would not have been possible if the Chinese had not lent a helping hand. The list of beneficiaries is long. The biggest has been Alibaba that has invested in start-ups like PayTM and PayTM Mall, Zomato, BigBasket, Snapdeal and logistics firm XpressBees, that have gone on to become unicorns. Unlike other venture capitalists from the US and Japan, Alibaba is also yet to exit from any of its investments. Other big Chinese investors include Fosun Tencent (invested $150 million in Hike; $400 million in Ola; $700 million in Flipkart) and Shunwei Capital ($2 million in Trubil; $18.2 million in ShareChat; $13.4 million in ZestMoney). Simultaneously, another area in India where Chinese companies made big inroads was in the domestic
market. Less than a decade into its existence, Leo Jun founded
ended South Korean electronics giant Samsung's stranglehold in the industry in India by the end of 2017. It has only strengthened its position since then while counterparts like Vivo, Oppo, Lenovo and Motorola have also made big inroads. At the same time, One Plus has overtaken the pole position in the premium smartphone space. To the unthinking mind, the two trends may appear to be unconnected but there is one common thread at the heart of both - the quest for big data and consumer insight.
is arguably the most precious commodity traded in the world market. An individual′s personal data that is easily convertible into consumer profiles is considered as precious as oil, gold or platinum in today's world. Tomorrow, when the internet penetration hits even more unseen highs, the dependence on a smartphone and the applications embedded in them would be even more valuable. Using this, data companies can devise products and services customised and targeted for specific consumers who can also be reached directly without any interface in between. Why this sudden fetish for investing in India Simple. India's big and potentially booming market. With a current retail consumer market size of around $800 billion, India is the fastest growing market in the world, estimated to grow at a compound annual growth rate (CAGR) of around 8 per cent. It is also the youngest country in the world. By 2020, the average age of India's 1.3 billion population would be just 29 years. Armed with over 700 smartphones, no long-winded brick and mortar retail shops are needed to service these consumers that are there for the taking. These investments are already bearing fruit. Beyond the rise of the Xiaomis, Oppos and Vivos in the hardware space, in 2018, TikTok, the Chinese developed M&E (media and entertainment) application, replaced WhatsApp as the most downloaded mobile app in India. Further, a majority of 46 of the 100 mobile applications on Indian smartphones that are used to consume goods and services through the internet including social media are developed by China. The data is hosted by other servers there. Again, on the face of it, it is a win-win. Armed with this amount of user intelligence data, it gives Chinese companies a definite if not decisive head start on how to develop and price products and services for the Indian consumer. This is not necessarily a bad thing. As one of the biggest traders and manufacturing hubs of the world, China knows how to make things. As mentioned above, the heavy purse strings that are being deployed to fund companies in India is also helping entrepreneurship in the country. There are possible roadblocks to this emerging Indo-China synergy in technology story as well. The biggest is the threat to the
with Chinese servers.
In the aftermath of the Cambridge Analytica (CA) fiasco in the US where the company was found to have used social media user profile data without consent for political advertising purposes, the issue of data ownership and privacy has taken centre stage in the technology space globally. CA's actions were deemed to have influenced the results of not only the US Presidential Elections but also the Brexit referendum. Since then, various government have taken steps to secure their cyberspace. Given India's tenuous relations with China on the foreign affairs front, the topic has cropped up here as well. In July this year, Congress MP and one of the most popular social media personalities Shashi Tharoor raised suspicions over TikTok's illegal data transfer to China and rued India's weak data protection framework. He said it was akin to a matter of 'national security.' The Indian government immediately sought a response from ByteDance, the parent company of TikTok, which was quick to refute such claims, but the concerns linger. Similar allegations were also made against Internet web browser UC Browser, which was suspected of leaking data to servers in China. Many Chinese companies including TikTok and Xiaomi have shown willingness to cooperate with the government with the promise to do whatever it takes to assuage concerns over data privacy. That includes shifting servers outside of China's mainland or even within India. Yet, a lot will depend on how stringent India's upcoming data protection law will be, the preparedness of Indian start-ups in adopting them and any fundamental change in the way business is done today. This is an area that is still new to the world and China itself is working on a data protection law of its own. The learning curve for companies in both countries could be steep but similar, opening up the possibility of them leaning against each other to pave the way forward. In a world getting torn by trade wars on one hand while at the same time getting even more globalised by internet on the other, India and China seem to be treading an increasingly conjoined path.
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