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59 Chinese Apps Including TikTok App Banned in India: How Will It Impact India-China Relations?

Jul 1, 2020 1:19 PM 4 min read
Editorial

In a first, the Government of India on Monday banned 59 Chinese apps, including extremely popular ones like TikTok, UC Browser, ShareIt, Shein and CamScanner, stating that these apps were “prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.”

The move comes following the mounting border tensions between India and China in Ladakh’s Galwan Valley.

 TikTok

 

Strike While the Iron is Hot

The news sent ripples across industries and many tech leaders took to Twitter to applaud the move.  

Balaji S Srinivasan, a prominent Silicon Valley-based angel investor announced that he is teaming up with AngelList founder Naval Ravikant to back Indian versions of the 59 Chinese apps banned by the Government. Srinivasan invited proposals along with links of working prototypes (not decks!) through a tweet.

 

 

While some others, like Elliot Anderson (remember the guy who called out the Government’s Aarogya Setu App?) didn’t agree as much. 

 

 

Appealing to popular domestic demands to stand against China and nationalist sentiments aside (#ChinaGetOut #ChinaWingsClipped), we have a look at the impact of this ban on India-China relations.

 

A Massive Blow?

The move is likely to have a drastic impact on Chinese firms, many of which count India as their biggest market.  

TikTok, Club Factory and UC Browser and other apps put together had more than 500 million monthly active users in May, according to one of the top mobile insight firms.

Including TikTok, six of the top 10 most downloaded apps in India were from Chinese tech companies, according to a report published in April by Paulson Institute’s MacroPolo think tank; up from just three in 2015.

 

China vs US Market Share of Top 10 App Downloads in 2015
Source: Marcopolo.org
China vs US Market Share of Top 10 App Downloads in 2019
Source: Marcopolo.org

 

As per data released by SensorTower, TikTok was the most downloaded app worldwide for May 2020 with more than 111.9 million installs, and India accounted for the most number of downloads at 20%, followed by the US at 9.3%. 

To give a sense of the potential loss, consider this:

When TikTok was blocked in India for a week in 2019, TikTok’s parent company ByteDance had said in a court filing that it was losing more than $5,00,000 a day.

 

Double-Edged Sword

The ban is part of a greater resistance against reliance on China, especially given the strained relations on the border.  

But if such a war is struck, both sides will bleed.  

As per recent reports, the Department of Telecommunications (DoT) is planning to ask state-run telecom companies BSNL and MTNL to stop using Chinese equipment from companies such as ZTE and Huawei in their 4G expansion. 

Indian authorities have also privately warned telecom operators against working with Chinese companies in the rollout of new 5G networks. 

However, this move is likely to cost the telecom industry in India dearly. 

The size of the telecom equipment market is around ₹12,000cr ($1.5bn), with the share of Chinese products around 25%. 

Switching to European vendors such as Nokia and Ericsson could see a 15%-20% increase in their procurement cost. Moreover, Chinese vendors also provide attractive vendor financing, which may be lost to Indian operators.

Fact Fact: Reliance Jio is the only operator which does not have a Chinese vendor but its network is fully built by South Korean Samsung rather than European vendors.

In addition to this, some of these platforms like TikTok are the sole source of income for many Indian content creators. 

Many of these apps also have offices and employees in India, putting a few thousand jobs at stake. ByteDance alone has around 2,000 employees in India.

But is weaning off dependence from a handful of Chinese apps enough? 

As per Arvind Panagariya, Indian-American economist and former Vice Chairman of NITI Aayog, “in 2018, China’s exports to India were only 3.1% of its total exports. In contrast, India’s exports to China were 5.8% of its total exports. Chinese exports to India may be four times its imports from India in absolute terms but once we take the difference in economic size into account, India’s ability to inflict greater damage on China begins to look suspect.”

“The argument against sanctions is reinforced by the fact that they would hurt not just China but India as well. Imports from China are 15% of India’s total imports. And contrary to the common claim that China exports only finished goods to India in return for minerals and raw materials, its exports include significant volume of components and raw materials for a large number of critical industries. Any interruption of supplies of these raw materials and components will hurt output and employment in those industries.”

Whether banning apps or placing selective restrictions on imports of ACs and TVs is an instance of ad-hocism OR one cog of a larger strategic alignment of India’s economy away from China - only time can tell.  

The evidence in favour of latter is as of now wanting.  

About half of India’s electronics imports come from China, as do two-thirds of the materials it needs to make drugs for its lucrative generic pharmaceuticals sector.

Against these statistics, and given the battered state of the Indian economy, will waging a trade war against China prove prudent for India? 

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