India cracks down on erring China’s tech companies amid lukewarm ties


The first week of March saw the Indian government accusing the Chinese telecommunications giant, Huawei, of tax evasion -- charges that were drawn up merely two weeks after raids were carried out across the tech giant’s offices in Delhi, Gurugram and tech hub, Bengaluru. These charges come amidst long-standing tensions between the two countries since the 2020-LAC border skirmishes between China and India.

The Galwan valley incident that took place between China and India in June 2020 over their shared border, saw ripple effects and subsequent consequences as Indians ramped up its ‘Boycott China’ campaign. Tensions between the two countries have remained high after the clash, and India has been taking regular steps to curtail China’s economic interests in the country, with India often indicating that Chinese presence in the country is a threat to national security.

The allegation that the operation of Chinese entities in foreign countries present a security risk were not without reason, as Huawei has been under intense scrutiny at the hands of Western nations for allegedly spying for the Chinese government1 . While it is yet to find out concrete proof of espionage at the hands of the company, numerous world powers, including the US, UK, Australia and Canada have worked to push away Huawei’s influence and workings out of their respective countries.

Do Chinese businesses really pose a threat?

In 2017, China passed the National Intelligence Law, which gave the country the right to have all-encompassing control and access to the data collected by Chinese companies — most businesses notably operate with a sizable international user-base. In essence, the law ensures that all Chinese outfits can be turned into tools of state espionage at the behest of the government, as and when the need arises.

This law falls in line with the policy, which China has adopted, as Beijing has strategic plans underway in all spheres of life to heavily monitor and control the lives of its citizens. In recent years, under Xi Jinping’s increasingly authoritarian regime, the Chinese intelligence has become fairly intertwined with Chinese businesses; businesses overseas have, in the past, been believed to have intelligence agents planted within their offices across the globe2 . A former employee of Huawei made the statement that, “Everyone has to listen to the state. Every person. Every company and every individual, and you can’t talk about it. You can’t say you don’t like it. That’s just China.”3

Huawei’s rapidly declining place in the world

Huawei has been a topic for debates concerning national security in countries all over the world. The Chinese brand is the world’s leading manufacturer of telecommunications equipment, with the largest share of 29 per cent in the global market4 . Despite its large market, countries are now beginning to curtail the presence of Huawei in their critical infrastructures due to the company’s ties to the Chinese government and the possible havoc, which could be wreaked if Beijing chose to do so.

Huawei is also involved in manufacturing consumer devices such as smartphones and laptops, however, its true domain is the production of core infrastructure devices, which transmit data within a network. Essentially, the equipment is responsible for how data travels across various parts of any network — the point of concern is that all data present in a virtual network goes through this Huawei gear.

While Alykhan Velshi, vice president of Huawei Canada, has in the past publicly claimed that the company has no control over, or insight into how its clients choose to use the technology they provide, incidences of data breach across the African continent have found data being funneled from clients to unknown servers elsewhere — events which are unlikely to have occurred without knowledge of the company.5

Furthermore, the founder of Huawei, Ren Zhengfei is a former deputy director of the People’s Liberation Army (PLA), a technical rank in the engineering corp. The direct link of Ren with the Chinese Communist Party has had consumer nations worried for how closely the business works with the government, and the amount of influence the government has over the company and its access to data.

Armed with the knowledge that the Chinese cyber security programme’s main goal is “full coverage”6 , it’s unsurprising that other countries where Huawei is part of the critical infrastructure are worried about the company’s presence and the security risk it constitutes. Recently, two of the Five Eyes nations, the US and Australia, outrightly banned Huawei from participating in their ongoing 5G trials; the UK, meanwhile, ideally hopes to replace all Huawei products, along with those manufactured domestically, all across the country by 20277 .

India’s take on Huawei and Chinese interests in the country

India, while not openly banning the Chinese giant, made its own subtle statement of distrust when it left the Chinese businesses, Huawei and ZTE, out of its list of 5G trial participants in 2021. However, this step does not restrict the companies from providing their equipment to other 5G networks.8 The Indian telecom sector is also attempting to reduce its dependence on Huawei citing security concerns, as in March 2022 the Vodafone Idea network was announced to swap its Huawei equipment with that of Nokia in parts of its telecom network9 .

While Chinese businesses assessed the Indian market to be one of the most promising to expand, the state’s actions to gatekeep Chinese firms have left business prospects largely crippled. The escalated border dispute since 2020 had put India on the defensive, with the country taking calculated steps to execute its “Boycott China” policy, and pushing Chinese business out of the country. In 2020, India implemented a ban on 59 mobile applications by Chinese developers following the border dispute. It is first of such kind of bans in India, the latest of which came in February 2022, taking the final toll of banned Chinese apps more than 220. The list of banned applications includes those immensely popular, such as ByteDance’s Tiktok, amongst others created by business tycoons Tencent, Alibaba, Baidu and the likes.

The ban on Chinese applications was put into effect citing reasons of security, with the government stating that they are engaging in acts that are “prejudicial to the sovereignty and integrity of India, defense of India, security of state and public order”.10 The belief that user data from these apps are transmitted to servers in China, where it is potentially mined and analysed for profiling citizens is at the heart of this move. Such actions are not uncharted territory for the superpower, as proof of surveillance and profiling of minorities in the country have often made news — an act, in which Huawei has also been found to be complicit11 . Moreover, further supporting the rationale behind the app ban, an Indian survey12 commissioned by The Economic Times in 2019 found that Chinese applications seek more data and permissions than necessary for their use, as compared to their counterparts.

While the Chinese businesses seem to have suffered no dire consequences having lost out on the Indian consumers, the silver lining is that it has allowed the Indian app development industry to flourish. With the Indian market being the world’s second-largest in terms of phone users, Indian innovators easily managed to swoop in to replace the banned applications and capitalise on the pre-existing market, leading to domestic growth—a page straight out of China’s own playbook for its own domestic development.

Similar to the app ban, India has also expressed the aspiration to reduce its widespread dependence on China, owing to the pandemic and disruption of supply chains, and more importantly, the state of affairs between the two neighbours. New Delhi is reportedly considering long term contingencies to reduce trade dependence on China. However, the official figures show that trade has continued to surge through 2021, even reaching an all-time high of USD 125.6 billion.13

India has a long way to go if it hopes to essentially root out Chinese presence in the country — managing to do so will be a real challenge. China’s tentacles are far-reaching and deep-rooted all over the world. Eradicating its sizeable international involvement in foreign nations may be harder and costlier than anticipated.

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