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Chinese app ban, tighter FDI rules not enough for India: Think tank

Investments in Indian social and other media (including those in regional languages) as well as start-ups could lead to a subtle push toward the Chinese narrative on bilateral issues and disputes with India, a shift to a more favourable depiction of China and suppression of criticism

twitter-logoJoe C Mathew | July 4, 2020 | Updated 00:30 IST
Chinese app ban, tighter FDI rules not enough for India: Think tank
Indian Prime Minister Narendra Modi, front and Chinese President Xi Jinping

India's decisions to ban 59 Chinese Apps and tighten rules to monitor foreign direct investment (FDI) flow from China may not be enough to arrest the economic invasion the country is fighting against China. The existing Chinese investments should also come under scrutiny, a recent report by Mumbai-based think-tank Gateway House suggests.

The report talks about the need to have a closer look at the investments made by nearly two dozen Chinese tech companies and funds, led by giants like Alibaba, ByteDance and Tencent in 92 Indian start-ups, including unicorns such as Paytm, Byju's, Oyo and Ola." These investments bring up three concerns for India: data security, propaganda, and platform control," points out researchers Amit Bhandari and Aashna Agarwal in their report titled 'China's strategic tech depth in India'.  

On the issue of data security, the Gateway House report says that Chinese companies such as Alibaba and Tencent (investors in Indian tech start-ups) have their own ecosystems, which include online stores, payment gateways and messaging services, etc. An investment by a Chinese firm can pull the Indian company into this ecosystem, which may mean loss of control over data. "Typically, in investments by a consortium of venture capitalists, one of the partners takes the lead in advising the start-up. If Alibaba/Tencent is playing this role, it can encourage the start-up to use pre-existing Chinese solutions for its tech requirements - again leading to loss of control over data. If this process is followed across a range of companies - a taxi service, a hotel aggregator, online retail outlets, a payment provider - it permits an intrusive, comprehensive profile of an individual and his/her habits", the report says.

Similarly, investments in Indian social and other media (including those in regional languages) as well as start-ups could lead to a subtle push toward the Chinese narrative on bilateral issues and disputes with India, a shift to a more favourable depiction of China and suppression of criticism. This kind of influencing by a foreign totalitarian government is detrimental to an open and free society, the report notes.

The third major concern, that of 'platform control' arises from the practice of Chinese tech majors to function as a "closed" internet, which restricts outsiders and is closely monitored and controlled by the state, the report says. "Companies like Alibaba and Tencent are enablers and beneficiaries of this system. If Chinese tech majors replicate their internet ecosystems in India, this can create a systemic risk. An ecosystem such as this controls access to end-users; it means other companies (retailers, financing firms and media) will have to follow the standards/technologies prescribed to them. Alibaba/Tencent will be in a position like Google - they can decide which firm will succeed or fail by controlling user access, using their own technologies," the report warns.

The report cited an instance of the US ordering a Chinese owner to divest majority stake in Grindr, a hook-up App for LGBT community after it was found that the data generated using the App was misused.  The researchers called for the establishment of an inter-ministerial committee akin to the Committee on Foreign Investment in the United States (CFIUS) to review foreign investments in India which calls for the collection of sensitive personal information. "It can consist of members from the Ministry of Home Affairs, Department of Telecommunications, Department for Promotion of Industry and Internal Trade, Ministry of Information and Broadcasting, Ministry of Electronics and Information Technology and the National Security Council of India," the report said.

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