SUMMARY
OYO, which has a huge presence in China, could bear the bulk of the consequences being the most visible brand
India’s focus on Huawei and ZTE for telecom equipment might impact their business with Indian IT companies
With China criticising India publicly, will there be consequences for Indian companies in China?
With the Indian government’s ban on 59 Chinese apps, the relations between India and China are at an all-time low. Many fear that India’s ban will invite retaliation and a response from China, especially impacting those companies which are currently operational in China.
While Chinese lawmakers have so far only expressed regret about India’s ban, there has been no action taken on Indian companies. The Chinese Foreign Ministry expressed that “ China is strongly concerned” and the Ministry of Commerce spokesman Gao Feng said, added that India’s actions are in violation of WTO rules.
In light of these moves by India, startups such as hospitality unicorn OYO as well as travel tech startup RateGain and others may have to adapt to criticism from the Chinese public. Since its launch in China in June 2018, OYO has become the second-largest hotel group in China, managing over 590K rooms in in 338 cities. But it might have to bear the bulk of the consequences, being one of the most visible Indian companies in China
OYO China had already laid-off thousands of employees, during the peak of COVID-19 pandemic in the country. Although the company had recently said in a report, that 70% of OYO hotels in China had reopened as the country moved out of lockdown, it is still unclear how tourists will react to its services given the nature of the pandemic and the current tussle between the neighbouring countries.
RateGain, which develops a travel technology SaaS, also has a presence in China, and has tied up with OYO for its business in China. Neither OYO nor RateGain responded to Inc42’s questions about the impact of India’s ban on Chinese apps on their operations in China. We will update the story as and when we receive a response from these companies.
Meanwhile, other Indian IT companies including Wipro, Infosys and TCS that have subsidiaries in China are also preparing for any changes in the market conditions that may adversely impact the operations. With India going after Huawei and ZTE, Indian IT giants could also face severe consequences if China does sanction Indian businesses. Further, contracts between Indian companies and these Chinese tech giants could also be soured.
Last year, tech industry body Nasscom launched its third phase of the Sino-Indian Digital Collaboration Plaza which sought to bring Indian IT companies and Chinese enterprises on a single platform for co-investments and collaborations. The industry body estimates that in 2019, Chinese IT services spent over $35 Bn, of which India’s share was around $500 Mn.
The ban on Chinese apps comes after India changed its FDI policy to add greater scrutiny on investments from China and other neighbouring countries. As per the norms, which are meant to curb opportunistic takeovers or acquisitions of Indian companies and tech startups by Chinese investors and corporations due to the current Covid-19 pandemic, will force such investors to use the government route to invest in startups. According to DPIIT data, India received FDI from China worth $2.34 Bn (INR 14,846 Cr) between April 2000 and December 2019.
