Until recently, the most fascinating story about Valsad was its Freddie Mercury connection — the British rock musician traced his lineage to this South Gujarat town that’s now a chemical industry hub. But when the town shut down in response to the Covid pandemic, Sanjay Rathod, a 29-year old who washed cars for a living, found himself out of work. He filled his long, vacant hours practising his dances moves and recording them on his smartphone, one with a broken screen and an inexpensive data pack. Soon, his videos were up on TikTok — and a new star was born. In a little over three months, Rathod, who went by the screen name ‘Armaan’, had earned 7 million followers on the video sharing app.

Last week, amidst a tense border standoff with China, the Centre banned the app along with 58 others for posing “emergent threats” to the country’s national security. While TikTok’s reach — with over 120 million active users in India — made it the most visible symbol of the government’s action against China, the other apps too had a deep presence in India. According to technology market research firm Counterpoint, almost one out of every three smartphone users in India had one or more of these apps on their devices.

Tailored for the first-time Indian Internet user, these apps are among hundreds that make up China’s digital presence in India, and which have been gradually edging out American competitors from the country’s top downloads since 2018.

In 2018, 44 of the 100 most downloaded Internet applications in India were made by Chinese companies, a huge jump from 18 such apps in 2017, according to a report in the Observer Research Foundation.

Last year, TikTok surpassed Facebook to reach 611 million downloads in India, according to Sensor Tower, a market analysis firm.

Tech as a strategic goal

But this is more than just an app story. From hardware to software, Chinese companies have dominated the digital technologies space in India over the last few years, with more than a little push from the Chinese establishment.

The Communist Party of China (CPC) has consistently viewed technology as the next frontier through which to establish its supremacy in the global market, with its ‘Digital Silk Road’ policy — announced in a white paper in 2015 — an attempt at expanding its digital footprints to 65 countries.

In 2016, the country’s National Cyber Security Strategy adopted the phrase “strong Internet power” as a strategic objective.

Numerous other strategies, such as the Internet Plus strategy of 2015 and the National Informatization Development Strategy of 2006-2020, explicitly call for the country’s largest companies such as Baidu, Alibaba and Tencent to push out products to international markets.

In India, the ground for this aggressive push from Chinese companies was laid in July 2014, when Xiaomi, often called the ‘Apple of China’, made its entry, followed by a flurry of Chinese brands such as Oppo, Vivo, OnePlus, Realme etc. The influx of these Chinese companies peaked in 2016 when Reliance Jio launched its cheap data offerings, starting with its free Internet package that disrupted the telecom sector.

Latest data by the International Data Corporation shows that among the top five smartphone sellers in the country, four are Chinese with Xiaomi topping the charts with a market share of 31.2%, followed by Vivo at 21% (see box).

This rapid increase in imports of electronic goods worried the Central government, which in April 2017 notified a phased manufacturing plan to ramp up domestic production of smartphones.

“The import of electronic goods was of the order of $53 billion (approximately Rs 3,44,500 crore) in 2017-18. With the demand for electronics hardware expected to rise rapidly to about $400 billion (approximately Rs 26,00,000 crore) by 2025, India cannot afford to bear a huge foreign exchange outgo on import of electronics alone,” the Ministry of Electronics and Information Technology detailed in its National Electronics Policy of 2017.

The efforts to make India a manufacturing hub for electronics resulted in dozens of Chinese companies and their contract manufacturers setting up base in Maharashtra, Telangana, Andhra Pradesh, Karnataka, Uttar Pradesh and elsewhere.

Chinese equipment vendors such as Huawei and ZTE also have a significant presence in the telecom equipment space in India. India telecom companies have depended on technologies by these Chinese equipment makers to take on European giants such as Ericsson and Nokia, a partnership that has helped bring down costs.

Thus, while the smartphones were being assembled in the country, most of the high-value components such as printed circuit boards, memory devices, storage units, processors, were — and continue to be — imported, much of it from China.

This has been mainly because of the scale of Chinese manufacturing that has enabled companies to offer cheap, low-cost products. Most of the Chinese products would technologically follow premium brands such as Apple and Samsung, often resulting in a $100-device with functionalities and design of a $1000+ one.

Even Indian brands such as Micromax had initially resorted to importing semi-knocked-down mobile phone units from China to assemble them locally and sell at a competitively lower price. The Gurugram-headquartered company, which is now struggling to maintain its ground, once led the Indian mobile phone market, beating global behemoths such as Samsung and Nokia. But this was before the entry of Chinese players, who together accounted for 114 million of the 158 million smartphones shipped to India in 2019.

In addition to flooding the digital market with affordable products, the Chinese also pushed the purchase of these products through micro-financing. For example, smartphone brand Oppo has jumped onto the financial services bandwagon in India, launching Oppo Kash. Realme and Xiaomi are the other smartphone makers that offer credit, investment and other financial products through their apps PaySa and Mi Credit respectively. These players are also engaged in providing services such as smartphone screen insurance, personal loan, business loan, free credit report and even mutual fund investments.

India’s financial technology sector hasn’t remained untouched either. Chinese e-commerce giant Alibaba is the largest investor in payment app Paytm. Zestmoney, which has raised Rs 236 crore till date in the form of equity, counts Xiaomi among its investors.