FPI / September 9, 2020
Commentary by Jason Orestes
India is instituting a crackdown on Chinese technology that makes U.S. President Donald Trump’s action look friendly in comparison.
India took a page out of the Trump administration’s recent executive order to ban U.S. transactions with Chinese companies Tencent and ByteDance (expelling massively popular TikTok in the process) because they represent a data-harvesting national security threat.
Last week, India banned 118 Chinese apps, a move that ostracized hit games from Chinese tech giants like NetEast, Tencent, Alibaba, and Baidu. India’s rationale was analogous to Trump’s, as they asserted these apps were “engaged in activities which are prejudicial to sovereignty and integrity” against India.
This is a follow-up to prior Indian action against Chinese businesses, having already banned 59 apps last June. “Chinese firms are learning a painful lesson. And, that is, the foreign policy of China has hijacked their business. China’s geopolitics with India has led to a nationwide fallout for Chinese firms,” Abishur Prakash, a geopolitical specialist at a Canadian consulting firm claimed.
India, like the U.S., has also banished Huawei and ZTE from its 5G infrastructure; something the U.S. has long lobbied its allies to impose and has implemented itself. These moves are very encouraging for U.S.-India relations, demonstrating an alignment with perception of geopolitical threats and strategy. India, with its over 1 billion population and world’s 5th-largest economy, is a critical market and ally for the U.S. to counteract Chinese mercantilist and military hostility.
If this is part of a greater Indian decoupling from China, it could be in real trouble. Trump has already introduced the once-unthinkable notion of ending relations with China, and it would asymmetrically harm Beijing, potentially reducing its GDP from 7% to 3.5% growth, and severely hampering its technological development (China’s IP and tech theft is well documented). Indian and American ties have been strengthened under Trump, underpinned by a close relationship between Trump and Modi. If India continues to follow in the U.S.’s steps with Beijing, that GDP will be further harmed. Strong domestic growth is seen by the CCP as a critical cog to maintaining social order.
These Indian actions present American economic opportunities as well.
The removal of these Chinese apps provides fertile ground for U.S. tech giants to expand market share. American firms consider India a substantial source of growth and one they have only somewhat tepidly been able to penetrate.
Apple is surprisingly absent from India, having only a 1% smartphone market share as it looks to open its first retail store in the country soon. Currently, the Indian market is largely controlled by Samsung and Xiaomi, who maintain over 50% of users. Not only is Apple looking to India as a source of growth, it is also looking to move manufacturing to the area to diversify away from China’s supply chain. Apple is not alone in this approach, as many U.S. companies have actively sought to leave China after its catastrophic mismanagement and deception around Covid 19.
The second-largest smartphone market in the world decisively moving away from Chinese apps bodes very positively for the largest company in the world gaining share for its App Store.
Google and Facebook are very bullish on India, having invested $10 billion into Indian technology company Jio Platforms: the leading mobile carrier in the country. U.S. investment like this should see an uptick as India’s eschewing of Chinese firms will likely leave a funding gap of sorts for Indian companies that have received a lot of Chinese investment.
Chinese companies and investors have put billions of dollars into Indian startups, with over half their startups valued over $1 billion being Chinese funded. These escalating tensions will likely diminish Chinese enthusiasm for investment and Indian receptiveness for those funds. Again, an advantage for the U.S. to further strengthen business ties with a critically strategic ally.
It’s not all beneficial for the U.S. though, much of this opportunity will be snapped up by Indian companies themselves. India’s ban of Chinese apps, while predominantly oriented towards national security, does have elements of Trumpian nationalism to it that are also concerned with protecting and growing homeland technology. So while Indian policy will likely be more advantageous toward Indian companies (as it should), the U.S. will be next in line to fill the void left by these Beijing bans.
Jason Orestes (@market_noises) is a former Wall Street financial analyst who focuses on contemporary political developments affecting economics, markets, and culture. His commentary can be found on Washington Examiner, TheStreet, MSN Money, RealClearMarkets, and RealClearPolitics.
FPI, Free Press International