Despite brutal border clash between India and China, tech bonds will be very hard to break

Almost every startup worth its salt has received investment by Chinese firms, making these bonds very tough to break despite chronic border hostilities.
Written by Rajiv Rao, Contributing Writer

Ever since India and China fought an intense and debilitating border war in 1962 where India suffered the brunt of losses, these two Asian giants have perennially locked horns.

A few days ago, another clash took place, the worst and the most gruesome by far since the conflict from almost 60 years ago, and one that is destined to redefine Indian-Chinese relations.

At 14,000 feet, in the Indian territory of Ladakh which sits on the Tibetan plateau, Indian and Chinese soldiers who had previously agreed to patrol the surroundings without weapons fell upon each other with stones and clubs wrapped in barbed wire like they were enacting some sort of ghastly episode from Game of Thrones.

Sadly, the use of stone age weaponry was not fiction. Out of the roughly 600 soldiers from both countries, 20 Indian soldiers and an unknown number of Chinese soldiers perished.

When Hindu nationalist Indian Prime Minister, Narendra Modi, makes noises of war against archenemy Pakistan that is one thing. To do so against the heavily armed and belligerent neighbour China, however, is to court certain disaster. Hence, the comparatively muted response this time around from New Delhi by the otherwise sabre-rattling Prime Minister.

The big question now will be how Indiahandles the gruesome fight against China.

The most immediate repercussion has been the cancelling of a $65 million contract given to signalling giant China Railway Signal and Communication to upgrade systems in one of the country's rail corridors.

The government's Department of Telecommunications has also communicated to two state-owned telecom players, Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Limited, to not use equipment from Huawei or ZTE in their network upgrades to 5G. Huawei or ZTE had previously been very active players in the Indian network equipment scene.

The most poignant part of this decision is the fact that the Indian government has not, as yet, banned Huawei from participating in its private sector 5G upgrades for which it received permission to participate in. The fact is, India needs China badly, and the vice versa applies. Chinese equipment is cheaper than its competitors, which is a difference that is crucial to the struggling Indian telecom sector.

According to Brookings Institute researcher and The Hindu journalist Ananth Krishnan, China currently has a planned investment target of at least $26 billion into India and has a trade surplus with India in its favour of $50 billion.

Any notions around blocking China out becomes even more improbable when you look at tech investments in India, where the dependency on India's neighbour becomes even more overwhelming. Since 2015, the Chinese have showered India with $7 billion worth of funding. There are nearly 118 Indian start-ups -- companies that received funding when they were less than 10 years old -- that have a total of $5.6 billion un-exited Chinese investments, as per data from Venture Intelligence

According to the Gateway House, a Mumbai-based think-tank, at least 18 of the 30 unicorns -- startups valued at over $1 billion -- have investors who are big Chinese technology companies. This list includes outfits such as BigBasket, Flipkart, Zomato, Paytm, Ola, and Oyo. The report emphasised that since most Indian venture capital financiers are wealthy individuals or family offices, they are simply unable to cough up the $100-million plus amounts that startups need in order to weather the losses of the early years, but this is chump change for Chinese tech outfits.

If you look at a different landscape of tech, the app industry, Chinese supremacy reigns there too. According to reports, out of the 100 most popular Android apps used by Indians, 44 were Chinese, including five in the top 10, such as the immensely popular Tik-Tok owned by tech behemoth Bytedance. Meanwhile, Alibaba's UC browser is now on half of India's Android phones.

With smartphones, Chinese domination in India is already complete, with four out of the top five brands originating from China -- Xiaomi; Vivo; Oppo; and Realme -- which accounted for $16 billion worth of smartphone sales in 2019, according to IDC. All of these companies have opened factories in India and employ hundreds of thousands of Indians.

Earlier this year, the Indian government did try to put a dampener on the massive and growing Chinese influence on its tech space by announcing new rules for foreign direct investments from countries that share a land border with India, stating that they would be looked at with greater detail than usual in order to support companies that have been weakened from the pandemic and may be susceptible to hostile takeovers. Observers suggested that the rules were vague, and lo and behold, the government is now rethinking the endeavour.

These days the ties that bind China and India are seemingly those dictated by capital and technology; and while India has nuclear weapons, like China does, it is a much poorer country compared to its neighbour.

Indians may burn posters of Xi Jinping but they will not give up their cheaper, value-added Chinese smartphones. If there is any stark, overarching reality to this conflict and these two feuding nations, this is it.

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