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| They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon. |
Importantly from an IPE perspective, will there be economic consequences for this particular encounter? In particular, the Indians have been avid buyers of PRC tech goods--and count on Chinese sources of investment also. So despite Indian officials allowing for some public letting off of steam directed at China, there will likely not be a break in their commercial ties. Simply put, India does not have the production capabilities or an alternative supplier (ideally nearby) to China at the current time:
India imports more goods from China than any other country. And over the past decade, India and China have enabled each other's rise as emerging technology powerhouses. Chinese tech giants have invested billions of dollars into India's biggest startups, while its smartphone makers dominate the country's market and Indians have flocked to apps like TikTok.Now, the dispute threatens those ties. Growing anti-China sentiment in India has already led to calls for a boycott of Chinese products and services, while new rules on foreign investment could constrain China's ability to cash in on India's internet boom.
What are the chances of a realistic Indian boycott of PRC tech? Slim to none:
China has created a significant place for itself in India's technology sector over the last five years, according to a report published by Indian foreign policy think tank Gateway House. Unable to convince India to sign on to its global infrastructure project known as the Belt and Road Initiative, China entered India's tech scene by flooding the market with cheap smartphones from brands such as Xiaomi and Oppo and plowing money into Indian startups.
Gateway House estimates that Chinese investors have poured some $4 billion into Indian tech startups since 2015. Alibaba (BABA), for example, has invested in Indian e-commerce company Snapdeal, digital wallet Paytm and food delivery platform Zomato. Tencent (TCEHY), meanwhile, has backed Indian messaging company Hike and ride hailing app Ola. Gateway House found that more than half of India's 30 unicorns — private firms worth more than $1 billion -— have Chinese investors.
Despite some new rules to curb PRC investments disguised as additional scrutiny of those emanating from countries India shares borders with--Pakistan isn't investing in Indian tech anytime soon--India can only hope to channel some PRC investment in areas which may generate some jobs there. It's a structural dependence India has on China:
"I don't think there's a widespread understanding of how difficult it would be to completely reduce India's reliance on China," said Ananth Krishnan, former Brookings India fellow and author of the report.India relies on China for everything "from heavy machinery and all kinds of telecom and power equipment, to active pharmaceutical ingredients," said Krishnan, who is now a reporter with The Hindu newspaper. In his Brookings report, Krishnan estimated that the total current and planned investment from China into India is at least $26 billion. Trade between the two countries reached more than $87 billion in the 2018-2019 fiscal year, according to India's Department of Commerce. China was India's second largest trading partner that year, just behind the United States.
Also note that PRC smartphone makers have set up shop in India already, making them fairly entrenched in India's commercial scene:
Last year, four of the top five best-selling smartphone makers in India were Chinese: Xiaomi, Vivo, Oppo and Realme, according to market research firm IDC [...]
And all of them have manufacturing facilities in India. Doing so allowed the Chinese firms to both embrace Prime Minister Narendra Modi's "Make in India" program and avoid stiff import tariffs. Xiaomi manufactures 95% of the phones it sells in India locally. "So if you're talking about cutting down the sales or shipment for these guys, it also impacts the factories that they have in India," which will "absolutely" affect Indian jobs, said Kiranjeet Kaur, an analyst with IDC.
