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Jul 14, 2020

India’s TikTok Ban Latest Overseas Setback for China Tech

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The short-video platform TikTok has become China’s latest homegrown technology company to run into growing resistance from foreign governments wary of perceived ties to Beijing and concerned about protecting user data.

The app, owned by tech unicorn ByteDance Ltd., suffered one of the biggest blows so far to its global expansion Monday when it became one of the dozens of Chinese apps banned from India on national security grounds.

At least 120 million people in India use the service each month, according to the company, which isn’t the first big Chinese tech name to suffer such setbacks. Telecom-equipment maker Huawei Technologies Co. Ltd. is currently grappling with growing animosity from the U.S. government, which in May strengthened a 2019 tech export restriction that made it harder for the company to access U.S. technology.

TikTok has been under fire for much of the last year, mostly in the U.S. where it was accused of snooping on user data. But now its troubles have spread to India, where on Monday the government accused it and 58 other apps, including Tencent’s WeChat, of engaging in activities detrimental to the sovereignty, integrity, and defense of the country, along with “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.”

The ban also came on the heels of reports that TikTok was able to access text that iPhone users had copied to their clipboard, forcing Bytedance to defend itself.

TikTok had been targeted before by Indian regulators. In early 2019, they temporarily removed it from app stores on the concerns it was addicted to teenagers. In July, it also faced accusations that it was inappropriately collecting user data.

This time around, however, the consequences could be more long-lasting. The Indian government didn’t address what restrictions the “banned” Chinese apps would now face. On Tuesday, smartphone users in India told Caixin they were still able to use Tiktok and WeChat but said it appeared to have been removed from local app stores.

Rushabh Doshi, a tech analyst at research firm Canalys, said the government could implement the ban in two ways — by demanding that the domestic app stores suspend them, and by asking telecom companies to restrict internet access to those apps.

“The current ban on the app will put a halt to all its operations immediately, and set Bytedance into a ‘disaster recovery’ mode where it must address all the issues raised by the ministry on the apps suspected threat to India’s security,” Doshi told Caixin.

Responding to the Indian government’s move, TikTok said in a statement that the company would fully comply with the rule and said it didn’t share information with any government, including the Chinese government. “We have been invited to meet with concerned government stakeholders for an opportunity to respond and submit clarifications,” the company said.

China’s other big tech firms, Alibaba Group Holding Ltd, Tencent Holdings Ltd., and Baidu Inc. also had some of their most well-known apps banned.

The unprecedented ban on the 59 apps took place against the backdrop of strained relations between China and India and came days after a border clash in the Himalayas left 20 Indian soldiers dead. Chinese casualties from the clash were not disclosed. The tension — compounded by the economic stress from the coronavirus pandemic — has likely pushed the Indian government to take a page from the U.S. government by finding ways to retaliate way that “would hurt China the most,” said Tarun Pathak, an India-based analyst at Counterpoint Research.

The Indian government’s dramatic announcement caught many off the guard and could have a chilling effect on strengthening business ties between the two Asian countries, analysts told Caixin. “The decision to ban though was taken way too quickly without considering the impact that it would have,” said Amit Jangir, an investor at Shanghai-based venture capital firm 01VC. “I’m afraid that a lot of overseas investors will now be reluctant or hesitant given that policy changes can be so drastic.”

Along with mobile app services, Chinese companies also control a significant share of India’s electronics market, particularly that of mobile phones. China-based brands hold almost 80% of the country’s handset market, according to Navkendar Singh, an analyst at consultancy IDC. Chinese brands such as Xiaomi, Vivo, Oppo, and Realme make up four of the country’s top five handset-makers.

However, these companies won’t take as much heat as Bytedance from the growing anti-China sentiment in India because they hold such a dominant position in the market. Still, some have already taken measures to side-step a ban. Xiaomi, for example, is marketing its products as “Made in India” to take advantage of the fact that many of the devices it sells in the country are manufactured or assembled in domestic factories, even if the company itself is Chinese, said Adwait Mardikar, a tech analyst at Canalys.

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