Stop app: How Chinese companies came to dominate India’s digital space

Stop app: How Chinese companies came to dominate India’s digital space

Written by Pranav Mukul
, Karishma Mehrotra
, Aashish Aryan
, Sandeep Singh

Updated: July 5, 2020 7:58:02 am

Last year, TikTok surpassed Facebook to reach 611 million downloads in India, according to Sensor Tower, a market analysis firm. (Representational)

Until recently, the most fascinating story about Valsad was its Freddie Mercury connection — the British rock musician traced his lineage to this South Gujarat town that’s now a chemical industry hub. But when the town shut down in response to the Covid pandemic, Sanjay Rathod, a 29-year old who washed cars for a living, found himself out of work. He filled his long, vacant hours practising his dances moves and recording them on his smartphone, one with a broken screen and an inexpensive data pack. Soon, his videos were up on TikTok — and a new star was born. In a little over three months, Rathod, who went by the screen name ‘Armaan’, had earned 7 million followers on the video sharing app.

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Last week, amidst a tense border standoff with China, the Centre banned the app along with 58 others for posing “emergent threats” to the country’s national security. While TikTok’s reach — with over 120 million active users in India — made it the most visible symbol of the government’s action against China, the other apps too had a deep presence in India. According to technology market research firm Counterpoint, almost one out of every three smartphone users in India had one or more of these apps on their devices.

Tailored for the first-time Indian Internet user, these apps are among hundreds that make up China’s digital presence in India, and which have been gradually edging out American competitors from the country’s top downloads since 2018.

In 2018, 44 of the 100 most downloaded Internet applications in India were made by Chinese companies, a huge jump from 18 such apps in 2017, according to a report in the Observer Research Foundation.

Last year, TikTok surpassed Facebook to reach 611 million downloads in India, according to Sensor Tower, a market analysis firm.

Tech as a strategic goal

But this is more than just an app story. From hardware to software, Chinese companies have dominated the digital technologies space in India over the last few years, with more than a little push from the Chinese establishment.

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The Communist Party of China (CPC) has consistently viewed technology as the next frontier through which to establish its supremacy in the global market, with its ‘Digital Silk Road’ policy — announced in a white paper in 2015 — an attempt at expanding its digital footprints to 65 countries.

In 2016, the country’s National Cyber Security Strategy adopted the phrase “strong Internet power” as a strategic objective.

Numerous other strategies, such as the Internet Plus strategy of 2015 and the National Informatization Development Strategy of 2006-2020, explicitly call for the country’s largest companies such as Baidu, Alibaba and Tencent to push out products to international markets.

In India, the ground for this aggressive push from Chinese companies was laid in July 2014, when Xiaomi, often called the ‘Apple of China’, made its entry, followed by a flurry of Chinese brands such as Oppo, Vivo, OnePlus, Realme etc. The influx of these Chinese companies peaked in 2016 when Reliance Jio launched its cheap data offerings, starting with its free Internet package that disrupted the telecom sector.

Latest data by the International Data Corporation shows that among the top five smartphone sellers in the country, four are Chinese with Xiaomi topping the charts with a market share of 31.2%, followed by Vivo at 21% (see box).

This rapid increase in imports of electronic goods worried the Central government, which in April 2017 notified a phased manufacturing plan to ramp up domestic production of smartphones.

“The import of electronic goods was of the order of $53 billion (approximately Rs 3,44,500 crore) in 2017-18. With the demand for electronics hardware expected to rise rapidly to about $400 billion (approximately Rs 26,00,000 crore) by 2025, India cannot afford to bear a huge foreign exchange outgo on import of electronics alone,” the Ministry of Electronics and Information Technology detailed in its National Electronics Policy of 2017.

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The efforts to make India a manufacturing hub for electronics resulted in dozens of Chinese companies and their contract manufacturers setting up base in Maharashtra, Telangana, Andhra Pradesh, Karnataka, Uttar Pradesh and elsewhere.

Chinese equipment vendors such as Huawei and ZTE also have a significant presence in the telecom equipment space in India. India telecom companies have depended on technologies by these Chinese equipment makers to take on European giants such as Ericsson and Nokia, a partnership that has helped bring down costs.

Thus, while the smartphones were being assembled in the country, most of the high-value components such as printed circuit boards, memory devices, storage units, processors, were — and continue to be — imported, much of it from China.

This has been mainly because of the scale of Chinese manufacturing that has enabled companies to offer cheap, low-cost products. Most of the Chinese products would technologically follow premium brands such as Apple and Samsung, often resulting in a $100-device with functionalities and design of a $1000+ one.

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Even Indian brands such as Micromax had initially resorted to importing semi-knocked-down mobile phone units from China to assemble them locally and sell at a competitively lower price. The Gurugram-headquartered company, which is now struggling to maintain its ground, once led the Indian mobile phone market, beating global behemoths such as Samsung and Nokia. But this was before the entry of Chinese players, who together accounted for 114 million of the 158 million smartphones shipped to India in 2019.

Source: IDC Quarterly Mobile Phone Tracker, May 2020 *All except Samsung are Chinese brands

In addition to flooding the digital market with affordable products, the Chinese also pushed the purchase of these products through micro-financing. For example, smartphone brand Oppo has jumped onto the financial services bandwagon in India, launching Oppo Kash. Realme and Xiaomi are the other smartphone makers that offer credit, investment and other financial products through their apps PaySa and Mi Credit respectively. These players are also engaged in providing services such as smartphone screen insurance, personal loan, business loan, free credit report and even mutual fund investments.

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India’s financial technology sector hasn’t remained untouched either. Chinese e-commerce giant Alibaba is the largest investor in payment app Paytm. Zestmoney, which has raised Rs 236 crore till date in the form of equity, counts Xiaomi among its investors.

The software presence

Once they had flooded the hardware market, Chinese companies launched a blitzkrieg on the software side as well. The three Chinese giants, search engine Baidu, online marketplace Alibaba and WeChat developer Tencent — also known as the BAT trinity — have invested in a bunch of startups in India, including unicorns (startups worth at least $1 billion) such as Swiggy, Zomato, Ola, Snapdeal, BigBasket and Byju’s among several others.

Of the 30 unicorns in the country, more than half have major investments from Chinese firms. Twelve of these count marquee investors Alibaba and Tencent among their backers.

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Simultaneously, hundreds of utilities app were launched on Apple’s App Store and Google’s Play, and a concerted push from the Chinese companies led to some of these becoming the most popular ones in their respective categories. These included CamScanner, which was used even by senior officials in the Indian government to scan and share documents on their mobile phones. The app was among the 59 banned last week.

Dev Lewis is among those who have witnessed the early days of this Chinese “gold rush” for the Indian digital space. Keenly aware of their own saturated user bases, Chinese companies big and small were eager to harness India’s data revolution.

In 2016, with a fresh diploma in Chinese language and literature under his belt, Lewis had his first job interview in Beijing at a little-known company called NewsDog. NewsDog was one of the forerunners in Chinese apps built exclusively for India.

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Now a fellow with Digital Asia Hub, a Yenching scholar at Peking University and researcher of India-China technology relations, Lewis says, “I remember the founder said something on the lines of, ‘I know nothing about India, but I know it’s the only other market like China. I missed the bus in China; I want to go for India’. It was a new gold rush.”

Characterised as ultra-experimentative and iterative, Chinese companies apply the Shenzhen manufacturing model — quick-to-market and quick-to-fix — for its products. ByteDance, which owns TikTok, has been called an “app factory”, with at least 21 products since its founding in 2012.

Another Indian, who requested anonymity, recalls her time in 2017 working at ByteDance in Beijing, where she was tasked with looking at international products for the company (the company had no products in India then). In November that year, ByteDance bought another Chinese-company,, which had a growing Indian base. In August 2018, it merged the company with TikTok.

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“These companies consider themselves global, not Chinese. They believe that whatever success they have in China can be replicated in a lot of other markets,” says the product strategist.

Chinese developers working on apps such as TikTok or NewsDog were quick to comprehend India’s highly-stratified market with divisions of Tier 2 and Tier 3 cities. “The themes of migration from smaller cities to bigger cities, from lower middle class to upper middle class — those are stories the Chinese can relate to.” Something worked and TikTok became a household name in India.

Given the app’s reach in India, global brands such as PepsiCo and Reckitt Benckiser, which makes Dettol, jumped on to the bandwagon, their video campaigns garnering views in billions on TikTok.

An expanding footprint

The increasing popularity of these apps also prompted the companies running them to invest heavily in their India operations. To begin with, to meet India’s data localisation norms, major companies with China links, including Tencent, Alibaba Group and ByteDance announced the setting up of data centres within India.

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Last year, ByteDance, which is based in Cayman Islands, announced an investment of $1 billion in India over a period of three years.

Through all this, there were concerns, much of those surrounding China’s far-reaching Internet laws, which experts interpret to mean that these apps and companies could be forced to give data to their government. They say that both the 2017 National Intelligence Law and the 2014 Counter-Espionage law can be leveraged by the Chinese government to seek data from companies that run out of India and other countries.

Despite these concerns, experts say China’s disproportionate presence in India’s app economy has allowed the Indian government a bargaining chip, albeit a low-hanging one, in these times of tension.

“This (ban) is just a stopgap measure… to convey that the Chinese should stop what they are doing, otherwise India has levers in other respects,” says Arun Mohan Sukumar, who is pursuing a PhD at Tufts University on international rule-making in cyberspace. “Whether they have the Digital Road or the BRI (Belt and Road Initiative), China just can’t ignore India. Half the population is still waiting to be connected to the Internet. No matter what our growth prospects, the digital economy will mature.”

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The bargaining chip may be pure signalling. To be sure, the Chinese-owned MiPay, MiCredit, and RealMe Paysa handle much more sensitive financial data, and have not been touched by this ban. Yet, the ban serves to highlight the growing diplomatic dimension of these digital routes into India.

“Data privacy has become the new national security. It’s natural that India would view Huawei differently from an Ericsson or a Nokia. Technology is not neutral. When you strip everything down, it’s a question of who do you trust more — the Chinese, the Americans, the Europeans,” said Lewis, the researcher of India-China technology relations.

While the Indian government has chosen to crack down on Chinese apps for now, the technology space offers plenty of fodder for diplomatic negotiations.

On the heels of the 2017 Doklam incident, the Defence Ministry asked armed forces personnel to uninstall 42 Chinese apps. More recently, Chinese tech company Huawei has been entangled in geopolitical concerns, as other members of the ‘Quad’ grouping (Japan, Australia, and US) have decided to ban the company from 5G infrastructure. India is yet to follow suit.

Speaking at the 2015 World Internet Conference in Wuzhen, Chinese President Xi Jinping was quoted in China Daily as saying, “Cyberspace should not become a battlefield for countries competing against one another.”

But now, it seems, a new front has opened. A virtual one.

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