Chinese Tech Under Scrutiny, Indian Tech can gain: GoI’s first move in global action that’s made Beijing nervous

Relevance: Government policies and their impact on Indian economy

Synopsis: A sharp crash in share prices of prominent Chinese tech companies due to steady expansion of government regulation, has led to decline in the market capitalization of China’s big tech companies to the tune of $800 billion. For Indian Tech companies, it is creating a new opportunity for expansion.

What’s happening in China?

• Lately, the Chinese Government has been taking various measures to address issues such as violation of Anti trust Laws, unfair market practices, violation of user privacy and mishandling of the user data by tech companies.
• Some of the country’s largest big tech companies like the Alibaba group, DiDi, Tencent Holdings, and ByteDance have come under government scanner for alleged violations. For instance Tencent’s WeChat, China’s largest messaging app, has temporarily suspended registering new users due to crackdown by the government

Reason for recent Crackdown?

• Banning of apps by India: It is believed that the origin of regulatory actions by Chinese government lies in the proactive actions taken by Indian government in June 2020 to ban numerous Chinese apps over the issue of data security and privacy concerns. GoI even banned popular apps like TikTok and PubG which had millions of user in India to protect the National Interest
• Start of a global debate: These actions by India started a global debate over potential security threats from Chinese big tech, leading to similar actions taken by then US President Donald Trump to ban multiple Chinese apps.

The action taken by Indian govt and the global debate it began, may have necessitated corrective measures so that Chinese tech companies could continue operations domestically as well as in foreign markets.

Possible Implications of Crackdown

1. These actions could usher a paradigm shift in Technology sector globally.
2. Market expansion of the companies will depend upon their ability to comply with legal provisions for user privacy, data sharing and fair market practices.
3. It will promote “Ethical Tech” while “Unethical tech” will face serious hurdles.
4. Opens up opportunity for Indian Technology Sector

How it can be a big moment for Indian startups and IT?

India has a good track record in regulating big tech, particularly in privacy and data protection. Indian companies have operated in that environment and have a good compliance record. That makes them attractive for both global markets and global capital, as evidenced by the recent Zomato IPO.

1. Increase investment opportunities : Actions of Chinese government could lead to a “Flight Of Capital’ from China and India’s Ethical Tech sector will benefit out of it.
2. Reduced competition : Crackdown on domain specific tech companies like online tutoring companies could reduce market competition for Indian companies
3. Market expansion : It could open doors for foreign markets and new customers for Indian companies.

Conclusion

The Indian government had initiated a global battle against unethical tech and their dangerous practices and the results are for everyone to see today.