Chinese tech company setbacks in India create opportunities for US firms, say experts

Over the past five years Chinese tech investors have injected an estimated US$4 billion in Indian start-ups; the accumulated level in 2016 was under US$1 billion

The fact that India’s policymakers became wary of Chinese tech and gravitated towards the US did not come as a surprise to some analysts

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Indian Prime Minister Narendra Modi endorsed Google’s new fund. Photo: Reuters

Published: 6:30am, 21 Jul 2020Updated: 5:03pm, 21 Jul 2020

India’s pushback on Chinese tech since a deadly border clash and amid recriminations over the Covid-19 pandemic, has created opportunities for US firms to fill the void, according to analysts.

Following Google’s announcement last Monday that it would set up a US$10 billion fund to invest in India’s digital services over the next five to seven years, the company revealed its first deal two days later: a US$4.5 billion investment in telecom firm Jio Platforms. Google’s move came less than four months after Facebook said it was pumping US$5.7 billion into Jio Platforms.

Google’s fund, publicly endorsed by Indian Prime Minister Narendra Modi and Electronics and Information Technology Minister Ravi Shankar Prasad, came after the world’s fifth largest economy moved to restrict foreign direct investment (FDI) from China to prevent “opportunistic takeovers and acquisitions” during the Covid-19 outbreak.

India’s restrictions on Chinese tech are part of a global trend in which democratic nations are becoming increasingly wary of Beijing’s global tech ambitions. On the geopolitical front, a deadly border clash last month saw an anti-China backlash in India. After many years of relatively friendly cooperation in technology, countries such as the US, UK, Canada and India are now looking to reduce their reliance on Chinese tech investment and products because of national security and human rights issues.

India’s new FDI curb, which bars investment from any bordering country without official clearance, has raised concerns that the drop off in Chinese investment may leave a “void” in India’s tech space, which has grown to rely heavily on Chinese funds in recent years. But US companies’ recent commitments to the country’s digital economy show that American firms are ready and willing to fill in that gap, say analysts.

Dev Lewis, a fellow at Hong Kong-based think tank Digital Asia Hub, said US firms are stepping in to fund Indian tech companies through equity investment, an approach more commonly associated with Chinese tech giants.

“Typically, companies like Google, Facebook would have their own operations in India in a big way but not necessarily going down the equity investment route. Chinese investors came in and they preferred to invest in Indian start-ups typically through equity investments,” Lewis said.

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