The India-China App Warfare. – (+91) India Internet Insights

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10% Indians speak English as their first, second or third language. Remainder 90% converse in Indian languages – consultants, venture capitalists and experts have christened this category, Bharat.

All of the 10 fastest growing cities in the world are in India ...

Hard-to-swallow truth, the 500 odd Chinese startups in India, build for Bharat, some exclusively for Bharat, alone. Let me explain further:

1. There are three country-of-origin, consumer technology systems in India, the first one is made, controlled and monopolised by the American tech giants.

Google, Facebook, Instagram, WhatsApp, Twitter and such companies, much of this internet system believes in doling out free products in exchange for user subservience with their data, stored not in India, but in the cooler climes of the Nordic. Their data is fodder for a hundreds-of-billions-of-dollars, state-of-the-art global programmatic advertising industry, which dishes out highly relevant ads to unsuspecting Indian users, in lieu for enjoying ‘free’ products (yes, those Good-Morning-Forwards come at a cost !)

American tech companies in India are focussed on the 10% English speaking Indians, understandingly belonging to a higher socio-economic class and their data in lieu of the ‘free’ products being the most valuable. No one complains, these American monopolies continue growing stronger and stronger, their listed parent companies inch towards a Covid-cum-Warren Buffet’s-logic defying Trillion dollar market capitalisations on NASDAQ.

Walmart owned PhonePe and Google together account for over 80% of all UPI transactions in India. Imagine the data and advertising revenue which shall accrue to Google. No one complains, all ignore the maxim, “if the product is free, you are the product”. Ignorance is sheer bliss.

if the service is free, you're the product. - Post by tizwaz on ...

2. India’s second internet system is run by Indian startups

Founded by usually engineering and occasionally liberal arts graduates (trivia – none of them are MBAs, basically startups cannot be taught) funded by local as well as multi-national venture capital money, think of Paytm, Flipkart, Snapdeal, MakeMyTrip, Ola, Practo, Zomato, Swiggy, Oyo, Byju’s etc. These are focussed on cracking difficult problems and are focussed on serving all Indians, the English and non-english speakers, from metropolitan cities to small towns alike. Unlike their American counterparts, none of them dish out “free” products in lieu of user data, instead they focus on building real products and services. These companies enjoy fantastic scale, Flipkart has delivered a multi-billion dollar exit and all of them continue to motivate mint fresh graduates, returning after their mandatory trip to Manali or Ladakh, with a bulky DSLR dangling from their necks, a shot at entrepreneurship.

Interestingly 18 of the top 30 Unicorns produced in India have Chinese investment interests.

3. The third internet system in India is run by Chinese Startups, 500 of them.

Indian VCs, consultants, journalists and start-up expert Twitterati are found permanently hollering calls for Build for Bharat. So loud is the cacophony, that young entrepreneurs from China’s consumer tech industry, finding it impossible to build and compete with the dominating presence of 3-players Baidu, Alibaba, Tencent have heard the call, loud and clear, leading to the birth of India’s third consumer technology system, that of Chinese startups, consensus defined as headquartered in China, funded by Chinese and multi-national venture capital money, with operations in India.

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Think of all the 59 banned apps, TikTok, ClubFactory, ShareIt, CamScanner etc, India is bustling with Chinese startups, from dating, adult dating, astrology services, live video streaming, entertainment, cross border e-commerce, utility apps to over 100’s of Chinese digital lending companies operating in India. There are over 500 Chinese startups in India, all wanting to ride the Indian digital gold rush !

On June 29, three hours before the stroke of midnight, India television channels began flashing India’s banning of selected 59 apps. Many others of the 500 odd Chinese apps across dating, gaming (PUBG), fintech were miraculously, plain luckily spared or perhaps it is a factor of the speed at which decision was taken and the banned apps chosen. This short Arnab Goswami clip, summarises the speed of action and amidst his perma-euphoric mood. The apps were banned under section 69A of India’s Information Technology Act, this section has previously been used to ban porn, piracy, torrents and is making its debut to ban regular commercial ‘businesses’ & Apps – utilities, entertain, e-comm etc.

These 500 odd Chinese Apps have entire business operations, there are several thousands of Indians in the Chinese App ecosystem as users, suppliers, employees, professional service providers.

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Sample this, TikTok influencers from small Indian towns, as the Atlantic reports, “For Indians, TikTok is a mix of “timepass” and creative outlet, but for more and more of them, it is also a career choice, a path to financial success.” For TikTok influencers, this is the equivalent of their digital identity and livelihoods demonetisation.

Likewise, Club Factory and Shein, two extremely popular ecommerce operations in India, beyond their banned App, there is an entire ecosystem of Indian sellers, logistics, warehousing, digital marketing teams etc. These two have been banned, the equivalent of a digital lockdown of their operations. Most of the Indian buyers on these platforms belong to Tier 2-3 India, who are longing to buy an affordable, fashionable, generic, unbranded, mass-market product on impulse, preferably via cash-on-delivery.

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Hard-to-swallow truth once again, these 500 Chinese tech startups in India have finally got the pulse of the Indian consumer and now fearlessly compete in India’s democratic, free market, and they are loving this never before freedom. This competition creates multiple winners across the startup ecosystem, most importantly the Indian consumer, who has an additional choice, to shop on Shein vs Amazon or use TikTok over InstaGram.

This 59 App ban removes consumer choices and the loser is everyone in the ecosystem.

“History doesn’t repeat itself, but it often rhymes”, every-time an industry is protected, it negatively impacts their long term competitiveness and their ability to innovate, simply put, protectionism always ushers in complacency which reflects in product quality. Think of the quality of Maruti, Padmini (the car in John Abraham-Nana Patekar fun watch, Taxi 9211) and Hindustan motors before the international car manufacturers entered the domestic market. Sadly some 54 MNC’s left India in the 1970’s during the reign of Janata Party

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Maruti has fought well, prospered and continues to hold a > 50% marketshare without any protectionism. Ban or no Ban, Indian startups were innovating and competing head-on with the Chinese startups, building for Bharat. We are all cheering for them and may the best product win ! This ban will certainly give on a platter, space for Indian startups to fill the vacuum created by the 59 banned apps, perhaps make the competition local vs the hitherto international competition with Chinese startups on our home ground. Flipkart, Ola, Paytm were all built minus any protectionism, they competed with global leaders and went onto create category leaders. Imagine, their fate or product quality with protectionism.

All is not lost for the 59 banned apps, perhaps the Government could rescind the ban order if it deems these apps to be safe for India and Indians. Moreover, any of the banned Apps which entered India’ prior to 2017 could seek protection of their interests and investments for 15 years from the investment date, under the China-India Bilateral Investment Treaty, in-force between 2006-2018.

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The Govt should lay down strict rules and regulations for all apps to adhere irrespective of their country or investor origin. Everyone must adhere, violators should be transparently, severely penalised as per the laid law. Everyone will benefit.

Let free markets prevail !

And one more thing, Startups happen despite the government and not because of the government !

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Vibhu Arya
Vibhu has previously worked in India, Middle East, South East Asia, and China across banking, e-commerce, fintech, varied payment types, remittances, and blockchain.
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