"Data is the new oil." India's richest business tycoon Mukesh Ambani once said when he was entering new technology businesses a few years ago. True that - since those who can control data, control the narrative that can influence politics in any country and thereby control the masses. China, one of the world's most notorious communist regimes with an evil eye on India's border states and expansionist mindset, had not only embedded itself in the Indian society, the economy, and the technology ecosystem but came close to influencing the masses with its direct investments in India's emerging tech companies - this was revealed way back in 2020 at the peak of COVID pandemic resulting in the Narendra Modi government to amend its Press Note 3 on Foreign Direct Investments (FDI) and restrict China from making further investments in India.
But this year's Economic Survey Report released ahead of the Budget, foolishly advocated for higher Chinese investments, a suggestion that has been yet again rejected by the government after a meeting of key DPIIT (Department For Promotion of Industry And Internal Trade) officials last week.
The Economic Survey report authored by Chief Economic Adviser V Anantha Nageswaran wanted an increase in imports or to attract more FDI from China. Keeping in mind India’s substantial trade deficit with China, Nageswaran said he deemed the second more beneficial. "Encouraging Chinese investments would help reduce this deficit and foster domestic technical expertise," he said.
But the report does not take into consideration how China has earned itself a bad name globally for using its investments in tech companies and strategic infrastructure for spying, data theft with the use of apps, trying to instigate the masses against the incumbent governments in an attempt to make the left leaning communist regime supporters more powerful and also attempting to rob the youth and society of their intelligence with dumb video apps.
In April 2020, the DPIIT had released a press note which modified the FDI policy in India and an amendment was introduced to the Foreign Exchange Management (Non-Debt) Instrument Rules, 2019 (‘FEMI Rules’) to ratify the changes.
The press note stated that it was obligatory for investors from neighboring countries connected by land (which covered China) to seek government approval prior to investing. Additionally, the amended FDI policy blocked direct acquisition of investment by entities belonging to these countries by implementing non-tariff barriers. The aim was to curb the recent trend of the opportunistic hostile takeover of Indian companies by foreign entities since after the Covid-19 crisis it had emerged that China was buying all the weak/sick firms the world over by laying a debt trap.
China's Influence On Indian Masses
In India, Chinese FDI was small between $6.5 billion to $10 billion but its impact outsized and disproportionate to its value, given the deepening of technology penetration in India. Tech companies that have and had major Chinese investments earlier included Big Basket, Bayjus, Delhivery, Dream 11, Flipkart, Hike, MakeMyTrip, Ola, Paytm, Paytm Mall, PolicyBazaar, Quikr, Rivigo, Snapdeal, Swiggy, Uddan, Zomato among others. These are Indian companies that touch the lives of the majority of the population in the country. TikTok, owned by ByteDance, was one of the most popular apps in India before it was banned in 2020 and had overtaken YouTube. Xiaomi handsets were bigger than Samsung smartphones; Huawei routers are widely used. These investments were made by nearly two dozen Chinese tech companies and funds, led by giants like Alibaba, ByteDance and Tencent, which funded 92 Indian start-ups including Unicorns. It is these tech companies that hold a sway over the masses since they hold sensitive data and habits, which can be weaponized against a country.
Unlike a port or a railway line, Chinese tech investments are invisible assets in small sizes – rarely over $100 million – and made by the private sector, which did cause immediate alarm. All this adds up to just around 1.5 percent to 2.5 percent of the total official Chinese (including Hong Kong) FDI into India. Also, it does not cover investments made by funds based out of Singapore and elsewhere, where the ultimate owner is Chinese, so the actual investment in India will be higher.
The single largest Chinese investment in India was the $1.1 billion acquisition of Gland Pharma by Fosun in 2018. This accounted for 17.7 percent of all Chinese FDI into India then. Five other investments by Chinese companies, which exceed $100 million included the $300-million investment by MG Motors. A report by policy think tank Gateway House had identified over 75 companies, with Chinese investors concentrated in e-commerce, fintech, media/social media, aggregation services and logistics. The report also said that Indian start-ups rely disproportionately on overseas venture capital (VC) funding – all start-ups worth over $1 billion are foreign-funded. “Some like Flipkart and Paytm have been acquired outright. India still does not have a Sequoia or Google of its own.
Some large Chinese investing companies have their own ecosystems, which include online stores, payment gateways, 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. Chinese investors 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.
Why Is China Feared?
In 2020 at the peak of COVID pandemic, it was revealed that Chinese investors had cornered a major stake in 18 out of 30 Unicorn tech Companies in India. Unicorns are India's most valued start-up tech companies that were accorded with the status due to their game changing approach and innovation. But China managed to dominate the tech sector with investments in these companies, which was seen as detrimental considering the Shenanigans that China's dictatorial regime indulges in the world over. For instance, during COVID Israel woke-up to the fact that China had hidden spy devices in the gifts that it gave to their bureaucrats and Chinese hand was also much talked about in instigating the Capitol Hill riots in the US that nearly toppled the then Donald Trump Republican government.
There are numerous other examples where Chinese apps have been stealing private and confidential data from the countries where it has made investments. Globally, Chinese investments also came under scrutiny since COVID-19 is said to have been originated from China and spread across the world, especially in the US ahead of the elections that was alleged to be one of the reasons for defeat of former US President Donald trump in the November 2019 as voters did not go out due to fear of COVID.
In such a scenario, the economic survey report has failed to consider that any increase in FDI not only allows China to embed itself in Indian society but could also influence the masses.
