Exploiting the Chinese exit

Context:

• The article analyzes the economic opportunities which have opened up for India post the Chinese app ban in India.

The Chinese app ban in India:

• The government in September 2020 banned 118 applications — a majority being Chinese, on grounds of national security and sovereignty threat posed by these apps.
• In June 2020, the government had banned 59 Applications on similar grounds.
• India has additionally blocked Chinese companies from contracting to work on its 5G mobile phone infrastructure.
• Notably, the announcement comes amid tension between India and China along the LAC.

The Chinese growth:

• In order to appreciate the significance of the Indian move, the article examines the growth of the Chinese in the technology sector over the years.

1. Consolidating the domestic market

• During the initial years of the global Internet boom, the Chinese government began erecting censorship barriers and banned several popular Western websites and applications. The Chinese intent behind such a move was to filter and screen Western content available to its citizens.
• This had forced IT giants like Google and others to either fully pull out of the Chinese market or drastically reduce their presence in China.
• The censorship and other restrictions of international companies in the field of the internet have paid rich dividends for the domestic Chinese economy.
• During this time the Chinese Internet market experienced a high growth rate. The active internet users in China grew from just over 300 million in early 2010 to over 900 million users currently.
• The Great Internet Wall of China had helped insulate Chinese entrepreneurs from Big Tech of Silicon Valley. This allowed home-grown firms such as WeChat and Alibaba a market to expand on their businesses.
• Though initially, the homegrown firms built copy cat versions of popular apps from Silicon Valley, they soon morphed into distinctly Chinese applications tailored solely to the home market.
• Baidu has replaced Google in China. Youku Tudou is YouTube, and Xiaohongshu is a version of Instagram. WeChat which began as a simple messaging app has diversified into other fields like social media, news, messaging, payments, and digital commerce.

2. Venturing into the international market:

• Recognizing their mistake in failing to make themselves an IT outsourcing services superpower like India, China has also been focussing on external markets.
• Popular apps like TikTok and PUBG have captured international markets.
• The Chinese multinational technology company, Huawei Technologies is a leading global provider of information and communications technology (ICT) infrastructure and smart devices.
• China has been investing heavily in new technologies like Artificial Intelligence and is leading global efforts in fields like “neural networks” and “deep learning”. This would place China as a technological superpower in the coming times.
• Artificial neural networks, also referred to as neural networks, are computing systems vaguely inspired by the biological neural networks of a human brain.

• The article argues that the decision to ban Chinese apps in India is not only a geopolitical move but also a strategic trade manoeuvre that can have a significant positive economic impact for India.
• Banning these Chinese websites and applications to the Indian public effectively allows our home-grown IT talent to focus on the newly arrived Internet user.

Potential of the Indian Market:

• With over 600 million internet users, India is the second-largest online market in the world, ranked only behind China.
• India has been witnessing the widening reach of Internet connectivity across the country with hundreds of millions of non-urban Indians emerging as new consumers. India is among the fastest-growing markets for digital consumers with the country recording double-digit growth over the past several years, driven by rapid internet growth in rural areas.
• The data generated by this large consumer base is a valuable commodity for internet-based companies.
• The Chinese Internet industry could be interested in using data generated by the Indian consumers to test and implement the AI technologies they have been developing.
• The big tech firms from Silicon Valley have been looking to consolidate their base in Indian markets.
• India is also unique in the sense that India hosts diverse markets given the regional barriers created by the numerous languages spoken in India. This provides an accretion of excellent smaller markets, with opportunities for specialised Internet services created for a local community.

Issues:

• While big tech firms from Silicon Valley and China in both hardware and software have been in a tussle over the Indian consumer, India’s focus remains on exporting IT services while paying little attention to servicing our own nation’s tech market.
• While India’s focus has been on exporting IT services, the vacuum created between the increasing demand and limited domestic supply has been filled by American Big Tech and by the Chinese.

Way forward

• The primary Indian IT objective must shift focus from the export of IT services to servicing the domestic market.
• The fundamental focus of the new digital products should be to provide for regional necessities and preferences.
• There is a need to create hyper-local and hyper-regional services of high quality that are also portable across our linguistic diversity. This could help establish a strong Internet market in India.
• Technology companies all over the world have focused their efforts on 15% of the world’s population with deep pockets while largely ignoring the other six billion denizens of the world’s population.
• India could consider sharing its technological know-how with other countries in the “south”, such as those in Africa and Latin America. This would help expand the market for Indian companies.