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Analysis: Chinese tech companies bet big on India. Now they're being shut out

December 11, 2020. Summarized by summa-bot.

An Indian mobile user browses through the Chinese owned video-sharing 'Tik Tok' app on a smartphone in Bangalore on June 30, 2020. - TikTok on June 30 denied sharing information on Indian users with the Chinese government, after New Delhi banned the wildly popular app citing national security and privacy concerns. "TikTok continues to comply with all data privacy and security requirements under Indian law and have not shared any information of our users in India with any foreign government, including the Chinese Government," said the company, which is owned by China's ByteDance. (Photo by Manjunath Kiran / AFP) (Photo by MANJUNATH KIRAN/AFP via Getty Images)

India and China's fast-growing tech sectors have been caught in the crossfire of an intense geopolitical standoff this year. While both will suffer from the showdown, Chinese tech companies have more to lose.

In the following weeks and months, Indian officials banned apps from Chinese tech giants Bytedance, Alibaba (BABA) and Tencent (TCEHY), and reportedly restricted embattled telecommunications equipment maker Huawei from participating in India's 5G network.

Locked out of that market, Chinese companies "stand to lose riding the ascent of possibly the world's third-largest economy by 2050 and the market with the world's second-largest internet users," said Shirley Yu, visiting fellow at the London School of Economics and founder of a company that assesses strategy, business, and political risk for companies working in China.

Chinese companies that had relied on India to build and test new products have seen those plans thrown into jeopardy, he said.

Beyond developing their own products, Chinese tech companies had been investing heavily in India's tech startups, pouring some $4 billion into the sector since 2015, according to Gateway House.

Then, amid the border clashes in June, the otherwise investor-friendly government of Maharashtra, a western state in India, paused or canceled a number of agreements signed with leading Chinese companies earlier this year, Ghosh said.

And if Ant and other Chinese tech companies disengage because of political tensions, India could miss out on leading edge technology.

Fernandes, of Gateway House, said that other tech companies are already rushing in to fill the void left by Chinese investors, and predicts that India will not suffer for long.

"Post the ban on Chinese apps it is estimated that $25 billion [of foreign direct investment] has found its way to the Digital India story, so in no way" is India losing out, he said.

Even so, India still remains far more open to foreign tech firms than China.

"While India may be going after Chinese tech firms, it is not going after anyone else . . .

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