India-China border tension: app developers, tech sector win with Chinese apps banned

If there's been one big winner from bristling India-China border tensions, it has been India's army of app developers.

In June 2020, two weeks after the worst fighting in half a century along their shared border, New Delhi took aim at leading Chinese tech firms including Tencent, Alibaba and Baidu, by banning 59 mobile apps. Alibaba owns the South China Morning Post.

The ban was part of New Delhi's economic retaliation for a clash that it blamed China for instigating - an accusation Beijing has dismissed. Among the apps banned was ByteDance's hugely popular TikTok, the first Chinese short-video sharing platform with a global fan base.

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So far, New Delhi has banned more than 220 Chinese apps, including 54 just last month. The prohibition has been a blow to China's app publishers that saw India as the next great growth market.

Some 65 per cent of India's 1.4 billion population is aged below 35, and 825 million people in the country are connected to the internet - a number that is expected to climb by another 300 million by 2025. China, by comparison, already has 1.03 billion internet users, according to state news agency Xinhua.

For India's app makers, the bans have been a boon in helping foster a home-grown tech sector. "Indian consumers have moved on to substitutes," said Pranav Pai, managing partner of 3one4 Capital, an early-stage venture-capital firm based in Bangalore. "The Chinese apps weren't unique. It's been a fairly simple migration to competing apps."

Elsewhere, Chinese apps are still wildly popular. They dominate the market in Southeast Asia and TikTok - described as "a global cultural force" by app analytics bible App Annie in a recent report - was the most downloaded app worldwide last year.

"The Chinese companies have continued to grow at scale, despite not having India," Pai said, "they're fantastic companies that know what they're doing. They're doing fine."

TikTok launched in India in 2017 and by the time it was banned could boast 300 million active users and 659.5 million downloads in the country. In the 20 months since, no single Indian app has been able to attain the same scale.

Still, a study by Redseer Consulting in April last year found that Indian short-form apps had managed to attract about 67 per cent of TikTok's former user base. "Indian start-ups have benefited tremendously from the ban," Pai said.

Analysts say banning Chinese apps has had a similar effect in India as Beijing's strict cyber sovereignty policy had in China.

In the years after Silicon Valley heavyweights Google, Facebook and others were frozen out, home-grown tech companies have flourished in China - thanks in large part to the lack of foreign competition.

In India, app makers had long complained that Chinese rivals were squeezing them out in their home market, making the bans popular among the country's army of software engineers.

"We've got a very deep talent pool. India has the highest concentration of software developers in the world so this has given a chance for the Indian app ecosystem to build," Pai said.

Indeed, the fact that Chinese developers had already invested in creating an app consumer base meant Indian players had "an added advantage to capitalise on a ready market", said Ishaan Khosla, founding partner of Huddle, a funding firm for early-stage companies.

According to a senior Google executive, Indian apps and games have been receiving "extraordinary interest" from investors, with their active monthly user base on the Google Play app store growing some 200 per cent between 2019 and last year.

App developers are also emerging outside India's big cities, which were previously seen as the main hubs of innovation. "The opportunity to innovate is no longer limited to select pockets of the country," said Purnima Kochikar, vice-president of Google Play Partnerships.

In May 2020, the month before the app ban began, Chinese developers accounted for 50 per cent of India's most popular apps across all segments, according to App Annie data, while Indian developers had only a 20 per cent share.

Now, Indian publishers account for six of the top 10 apps in the country, including social networking service ShareChat and short-video platforms MX Taka Tak and Moj - both of which only launched after Delhi began banning Chinese apps.

The results stand in stark contrast to Delhi's efforts to wean itself off Chinese goods. Indian imports from China soared US$97.52 billion last year, official Chinese data shows, a 46 per cent year-on-year increase.

In addition to TikTok, some of the other big-name Chinese apps included in India's initial round of bans were WeChat, UC Browser, Shareit, Baidu Map and the popular game PUBG Mobile, licensed by Tencent.

Authorities said the Chinese apps' harvesting of user data threatened India's national security - a charge that China has denied. TikTok, in its defence, said that its user data was stored on servers in the United States and Singapore, not China.

US tech behemoths Facebook and Google are also known to scoop up massive amounts of user data.

On February 17, Chinese commerce ministry spokesman Gao Feng criticised India's bans, saying they hurt Chinese companies' "legitimate interests", as he urged the creation of a level playing field for foreign investors. Indian media reports, quoting government sources, alleged many of the latest apps to be banned were Chinese-operated but run through companies in other countries.

Pai said the bans had drawn new investor money to Indian-made apps, with Beijing's ongoing tech crackdown also spurring a shift away from China to India and elsewhere as investors search for a more predictable regulatory environment.

"ShareChat raised hundreds of millions of dollars. It's done really well," he said. In December, the home-grown content-sharing and social networking platform, which has 180 million active users, raised US$266 million in funding from Singapore's Temasek Holdings and two other investors, driving its parent Mohalla Tech to a US$3.7 billion valuation.

"Also, if you look at other areas like gaming, we didn't have too many Indian gaming apps," Pai said. "To substitute for the loss of the Chinese gaming apps, new Indian games have been launched and players have moved quite seamlessly to them."

Last year, Twitter, investment firm Tiger Global and others injected more than US$900 million into India social-media platforms that cater to people more comfortable working in one of the country's many local languages aside from English.

Most Indian users of banned Chinese apps were able to migrate to other platforms quite easily, but it has not all been smooth sailing - especially for the TikTok content-creators who lost their millions of followers and associated sponsorship income virtually overnight.

Others, who had more modest followings, were also hit. Bhavna Kashyap, a 29-year-old beauty salon employee in Delhi, used to regularly receive 100,000 views or more for the daily videos she posted showing her lip-synching along to pop songs. She has since moved to MX Taktak - which launched in July 2020, has around 150 million active users and was recently bought by Mohalla for nearly US$600 million - but the view counts are not the same. "I cried. I had to start all over again," Kashyap said.

In terms of total downloads and hours spent on apps, India ranks second only to China, but Indian app users are not big spenders compared to their global counterparts.

Last year, India saw 26.69 billion app downloads - 11.6 per cent of the global total - and 69.9 billion hours were spent using apps in the country, compared to China's 98.38 billion app downloads and 1.12 trillion hours of app usage, according to App Annie data. The US, meanwhile, placed a distant third for app downloads with 12.19 billion.

Total spending on apps in India, however, was just US$417 million last year - far behind even Colombia, which ranked 20th on App Annie for consumer spend with US$1.79 billion.

Still, there is the potential for Indians to become a much bigger spending force as usage of shopping, dating and gaming apps grows.

E-commerce penetration in India is expected to grow faster than in developed nations like the US, analysts say, and while monetisation is still the challenge - in games, for instance, just 2 per cent of the apps are paid compared to the global average of 4 per cent - it is only a matter of time before India catches up.

"The Indian gamer's not a budget gamer. They're very willing to spend," Pai said.

This article originally appeared on the South China Morning Post (SCMP).

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