Geopolitical chess: India has answered China’s fait accompli with app ban and political signaling; onus now shifts to Beijing
India’s decision to ban 59 Chinese apps is an astute move as it circumvents WTO regulations on the question of national security and presents China with few retaliatory options
The India-China border tension is increasingly taking a more menacing turn. Diplomatic overtures are looking fruitless. Engagements are on at various levels. Military interlocutors have met several times and both nations have, at least publicly, professed faith in "talks" and past agreements as the path for "peaceful resolution."
However, instead of lessening of tension, de-escalation and withdrawal of troops and eventual restoration of status quo ante, both China and India are deploying more arms and armaments at the LAC, eyeing each other with suspicion, entrenching their positions and solidifying their offensive and defensive postures.
PM’s visit raises the stakes in Ladakh
On Friday morning, prime minister Narendra Modi paid an unannounced visit to a forward post in Ladakh where he interacted with troops, met the soldiers who were injured in the 15 June deadly clash at Galwan and delivered an address. In his speech at Nimu against the backdrop of Zanskar mountains amid forward-deployed troops, Modi had plenty of messages for China without naming it. He took a swipe at Beijing’s revanchism, saying the "era of expansionism is over", warned Beijing that history is rife with examples of countries that had to pay steep price for expansionist attitude and stressed that peace can only be achieved from a position of strength.
Media reports indicate South Block has reached out to envoys of permanent members of the Security Council on China's aggression at the LAC and attempts to change the facts on ground. As it did during the Doklam standoff, Japan has again stated its support for the Indian position, opposing "any unilateral" attempts to change the status quo.
Had a good talk with FS Shringla. Appreciated his briefing on the situation along LAC, including GOI’s policy to pursue peaceful resolution. Japan also hopes for peaceful resolution through dialogues. Japan opposes any unilateral attempts to change the status quo.
— Satoshi Suzuki (@EOJinIndia) July 3, 2020
The calibrated steps, Modi’s visit and investment of political capital have raised the stakes in Ladakh. Not just a morale booster for troops, the visit was also a political act showcasing India’s unity, strength and resolve in not rolling over and playing dead before Chinese aggression.
The message wasn’t lost on Beijing that interpreted Modi’s move as "escalatory" and accused India of undermining the effort to lower the temperatures through "military and diplomatic channels."
China’s ambassador to India Ji Rong went a step ahead and called the prime minister’s speech “groundless”, “exaggerated” and “fabricated”.
#China has demarcated boundary with 12 of its 14 neighboring countries through peaceful negotiations, turning land borders into bonds of friendly cooperation. It's groundless to view China as "expansionist", exaggerate & fabricate its disputes with neighbours.
— Ji Rong (@ChinaSpox_India) July 3, 2020
China also warned India of “strategic miscalculation”, innocuous words that hide more ominous undertones.
A sign of where things are: China's Ministry of Foreign Affairs uses a phrase today that I can't recall having been directed at India for a long time pic.twitter.com/m792KWGJP7
— Ananth Krishnan (@ananthkrishnan) July 3, 2020
India’s suboptimal choices
It is evident that trust between the two nations is in short supply. What happens from here is anybody’s guess. Even if two nuclear-armed nations do not intend to go into a military confrontation, the close proximity of two large, well-equipped armies in combat readiness on a mountainous terrain is an accident waiting to happen. Among the two, India has the more difficult task. China seems to have seized the grey areas of the LAC, consolidated its control and presented India with fait accompli.
China's creeping land-grab and accompanying force posture challenge India’s preferred method of quiet diplomacy. Given the loss of 20 Indian lives and violation of its territorial integrity, India is politically bound to respond but New Delhi’s options of achieving its objectives — removal of Chinese troops, dismantling of the newly built structures and restoration of status quo — are tricky, restricted and sub-optimal.
To solve this strategic predicament, India may either have to go for a limited, localized war to evict the PLA, or wait it out (while trying for a diplomatic and/or political resolution) till the onset of winter that may pose additional challenges for the PLA to remain entrenched.
Professor Rajesh Rajagopalan of JNU suggests kinetic action, proposing that if India seeks to avoid military action at all costs, that may further embolden China and pose long-term negative consequences whereas a military pushback may serve as a deterrence.
“…avoiding war may prove to be expensive in the longer term if it signals irresoluteness. China will be emboldened. Left unchallenged, there is a good chance it will push India again. China’s behavior does not suggest that this will be its last nibble. So, the question may be as much about deterrence, as it is about war,” writes the author in The Print.
Kinetic action, however, has its costs. Keeping it localized and controlling the escalatory spiral is an unlikely challenge, more so against a more powerful military and at a time when the pandemic has broken the back of Indian economy.
Vipin Narang and Christopher Clary argue in War on the Rocks that India’s military options sway between bad to worse and be it direct expulsion through limited coordinated offensives (since China is entrenched on four different points along the Ladakh sector), or indirect expulsion by gaining leverage in other domains and trading for withdrawal — none are likely to succeed. The authors count India’s non-military options as “limited” and contend that China has presented India with the worst option — accept the fait accompli and normalise the violation of India’s territorial integrity by absorbing the audience cost.
Are India’s non-military options ‘limited’?
To dismiss India’s non-military choices might not be prudent. Coercive use of economic levers has long been an integral part of China’s arsenal to achieve geopolitical and strategic objectives. From denying market access (as it did to South Korea over deployment of THAAD), forced transfer of technology, blocking of critical items (embargoing rare earth minerals in 2010 to hurt Japan’s tech and automobile industry), boycotting and banning products of target countries (as it did with Canada, Australia) — China has an exhaustive toolkit.
There are two compelling arguments against India’s use of economic leverage against China. One, the coercive effect of India’s punitive measures won’t be sharp and short enough to compel China to withdraw from the LAC and restore status quo within India’s preferred time frame. Two, India’s economy is so intrinsically dependent on China that it is impossible for New Delhi to hurt Beijing without grievously hurting itself — more so because it suffers a massive deficit in bilateral trade.
A related argument is the reality of China’s centrality in global supply chains and integral role as the world’s second-largest economy in global financial system. Evan A. Feigenbaum, vice president for studies at the Carnegie Endowment for International Peace, writes in Macro Polo, “…China is integrated with dozens of other economies, both big and small. It is the world’s number-one trader, manufacturer, and oil consumer. For some countries, it is among their biggest buyers of debt and/or providers of project finance and other forms of capital. In fact, ‘going global,’ especially through investments in advanced industrial economies, has given Beijing more economic levers to pull.”
In comparison, it would seem that India simply doesn’t pull enough economic weight for its punitive measures to bother China, much less achieve its strategic aim. However, the assumption that India’s economic measures against China are ineffectual or at best limited must be challenged.
Why India is sitting on a gold mine
As the world shifts to a digital economy, data drives growth and change while fundamentally changing the nature of competition. Controlling information flow is the name of the game as ‘data-network effect’ takes over — more data shapes better network, improves services that in turn brings in more data and creates a lock-in effect.
Ride-hailing giant Uber, for instance, keeps making massive losses and yet it aims for a public valuation of $100 billion partly because it is sitting on the biggest amount of data on personal transportation. Getting access to data resources, controlling flow and firewalling rivals is the new normal.
To quote from The Economist, “Google can see what people search for, Facebook what they share, Amazon what they buy. They own app stores and operating systems, and rent out computing power to startups. They have a “God’s eye view” of activities in their own markets and beyond.”
In this new paradigm, India is in a sweet spot. It has a billion-plus population that will remain demographically young for another three decades and has the world’s last massive, untapped market that is only now getting connected online as a data revolution sweeps the country — reaching even the rural hinterlands — powered by a combination of affordable mobile phones and dirt-cheap data.
A market research firm has analysed that India’s number of internet users registered an annual growth of 18 percent to an estimated 566 million as of December 2018 — a 40 percent overall penetration. Of the total user base, 87 percent or 493 million Indians are regular users among which 293 million reside in urban India, while 200 million are active in rural India. Nearly 97 percent use mobile phones to access the internet. Finally, A double-digit growth projection will take India way beyond 600 million in 2019, according to an Economic Times report.
In other words, India is sitting on a data gold mine that tech firms in the new economy are desperate to access. The importance of Indian market lies not in its ability to produce immediate revenue but in the potential of creating value chains. This is the reason why world’s tech giants are pouring in billions and the geopolitical fight between the world’s most powerful nation and the presumptive superpower is being replicated across India’s digital space.
Amazon, Google, Facebook (that has chosen India for its first-ever mobile-payments system via WhatsApp) are being given a run for their money by China’s Alibaba Group, Tencent and ByteDance. Two simultaneous churns are happening at the moment in India. More and more Indians are getting online and watching videos, but India’s still patchy net connectivity make it imperative for apps to use less data and memory to load faster to make it attractive for users. This is where Chinese apps are gaining over their American counterparts. With their unique insights into the Indian market — that has some resemblance with Chinese space before it became more mature and advanced — Chinese apps are tapping new Indian users better at the cost of American presence.
According to a report in Wall Street Journal quoting a study done by a US think tank, "In 2019, six Chinese apps were among the 10 most-downloaded free apps, with TikTok at the top… In 2015, three Chinese apps made the top 10, which included five US apps."
This context is necessary to understand the data gold mine in India’s possession the nature of which is only now becoming clear, and why it may be used as a potent geopolitical tool to achieve strategic objectives. Population, demography and the ongoing digital revolution allow India to punch above its weight and challenge the conventional notion that India’s non-military coercive options are “limited”.
Understanding CPC’s Military-Civil Fusion strategy
As India becomes more self-aware about its advantages and learns to weaponize access to its lucrative market, one crucial difference separates American tech firms from Chinese. Crudely, while American firms are driven by profit motive and follow the logic of market economy, Chinese apps are dual-use entities that are used as digital weapons by the authoritarian Communist Party of China. An integral part of CCP’s ‘Military-Civil Fusion’ (MCF) strategy that seeks to harness the power of big data and AI, quantum computing, 5G and other emerging technologies through legit and illegitimate means to built the world’s most powerful and sophisticated military by 2049, Chinese apps and tech firms serve as spy agencies for the CPC and veritable tools in the hands of Emperor Xi Jinping, China’s president for life, general secretary of the CPC and China’s most powerful authoritarian leader since Mao Zedong.
Illegal mining of the most valuable of resources, data, enables Xi to manipulate and subvert democracies, further China’s interests and serve its geopolitical and geoeconomic motives. As Indrani Bagchi writes in The Times of India, "the Chinese playbook involves using apps like TikTok and and UC Browser for largescale mining of data that could be used by China for both political and military purposes. For instance, reports that US President’s recent rally registrations may have been hijacked by TikTok bots rang alarm bells in India."
The true significance of India’s ban
The significance of India’s decision to ban 59 Chinese apps and its full impact may only now become clearer. It is not just an economic retaliation against China prompted by strategic imperatives, it is also a partial firewalling of the Indian economy from the malicious machinations of a rogue state actor, a step that was overdue.
China’s growing footprint in and eventual domination of Indian digital territory could be more harmful than its territorial aggression along the LAC, and unless checked in time, it may further incentivize and sponsor more Chinese attacks on Indian soil, and allow CPC to interfere in Indian political and social spheres, as well as limit and stunt India’s growth and digital ambitions, as Samir Saran and Akhil Singh Deo persuasively argue in ORF.
Does India’s banning of Chinese apps amount to, as has been colorfully called, a digital airstrike? The answer is still in the negative because India is not a big revenue generating market, but the effectiveness of this step lies in the value, promise and scale of an untapped, billion-strong market and it hits a mercantile China right where it hurts. If controlling of data is the key to winning digital war, then India has already landed a sucker punch on China.
As the The Wall Street Journal report mentioned above notes further, the banned 59 Chinese apps totalled 4.9 billion downloads in India since January 2014, including 750 million so far this year, quoting data from Sensor app analytics firm Tower. Since April, eight of the 25 most-downloaded apps in India are from Chinese companies, according to the report. Sensor Tower has recorded 660 million total downloads of TikTok in India, 680 million downloads of UC Browser and 550 million downloads of file sharing app Shareit.
These mind-boggling numbers translate not only to enormous control over a fast-developing space, but also significant revenue. TikTok, the popular video-sharing app from China’s ByteDance, apparently has 120 million monthly active users in India and ByteDance is apparently anticipating a loss of around $6 billion due to India’s punitive steps.
Along with revenue and market share, the ban on Chinese apps may help US apps such as Instagram (owned by Facebook) and YouTube (Google-owned) gain more market share and even create some space for Indian startups to occupy. Given the pivotal role played by Chinese tech firms in furthering China’s geopolitical agenda and great power ambitions, India’s step to deny China access to a key market may complicate Xi’s MCF strategy. The stakes are high.
Why China is on defensive
This could be the reason why China has struck a conciliatory note and even its Wolf Warrior media has toned down the rhetoric. Global Times called India’s banning of apps an American conspiracy, blamed US Secretary of State Mike Pompeo and urged India to “keep a clear head and sees through these ulterior motives.”
TikTok, for whom India is the biggest overseas market, has claimed that it is not a tool for Chinese surveillance. Its new CEO has claimed that “Chinese authorities had never requested the data of their Indian users, and even if they had, the company wouldn’t comply.”
It is a tall claim that doesn’t pass smell test, given the all-pervasive nature of China’s National Intelligence Law (adopted at the 28th meeting of the Standing Committee of the 20th National People’s Congress on 27th June, 2017) that makes it imperative for Chinese firms to serve as the state’s espionage arm and contribute to national intelligence efforts and keep such activities secret.
India’s ban not only arrests China’s dominance of India’s digital economy — TikTok ended Facebook’s monopoly while Chinese smartphone brands dominate Indian market, the fastest-growing in the world — the ban at least partially moves towards mitigating the national security threat posed by Chinese software and hardware in India’s digital ecosystem.
It also creates precedents for other nations. As Chinese tech giants such as Huawei — that controls the plumbing of global digital infrastructure — are perceived more and more as an essential, coercive tools of the Chinese state that carries out state-sponsored data theft and steals intellectual property of competitors, more nations will be inspired to push back.
Setting a precedent
Close on the heels of Indian decision, we have seen three uncoordinated moves. While calls have been raised by Silicon Valley to similarly clamp down on Chinese apps, US lawmakers are being more vocal about sanctioning Chinese companies for engaging in spying, and supporting Chinese military’s efforts. (See here).
And just as India has witnessed the rise of techno-nationalism and calls for boycotts of Chinese products at an organic, societal level, US lawmakers too are increasingly calling for Americans to shun Chinese goods.
China’s lack of retaliatory options
Finally, India’s non-military intervention against China — decision to ban 59 apps — is also an astute move because it circumvents WTO regulations on the question of national security and presents China with few retaliatory options. Here, India has been able to weaponize the fact that it tolerates a lopsided trade relation with China.
As a report in Bloomberg points out, "While Beijing is highly adept at economic coercion, in this case it has somewhat limited options to act in a reciprocal manner… Bilateral trade is heavily weighted toward Chinese exports to India. Attempts to hurt India economically could blowback on Chinese companies." China has been able to do little else apart from firewalling certain Indian media outlets.
The nature and timing of India’s decision, however, is being perceived as a calibrated geopolitical step with more punitive measures in the offing depending on the trajectory of tension in Ladakh. Indian ministers are talking about keeping Chinese firms away from large-scale infrastructure projects, canceling railway tenders, Indian states are suspending China-funded projects and the prime minister has called for more a self-reliant India that steers clear of the dominance of Chinese imports.
Challenging the old notions of self-reliance
In taking economic countermeasures, India is giving China a taste of its medicine but it is important to stress that none of these are painless moves for an economy that is critically engaged with China, and depends on the Chinese market for components of many of its industries such as automobile and pharmaceuticals.
If it not decouple, at least a degree of disengagement from Chinese economy and reducing Chinese trade leverage over us has to be an urgent strategic imperative. The time is ripe for such a disengagement given the high degree of anti-China sentiment sweeping across India and a realization that it can no longer be business as usual with China.
In this quest to chart a new path, two things must be kept in mind. One, economic autarky is not a regressive idea when it comes to emerging tech and digital economy. The old arguments against protectionism collapse in this case. The traditional rationale against protectionism holds that steps such as import substitution and policies favoring domestic manufacturing stunts productivity and takes away the ability of domestic firms to be efficient and competitive.
China has belied this concept. While it kept out American tech giants like Facebook, Amazon and Google, Chinese startups used the space to become efficient and even globally competitive. As Harvard Law School fellow Vivek Wadhwa observes in Hindustan Times, “Over the Internet, knowledge and ideas spread instantaneously. Entrepreneurs in one country can easily learn about the innovations and business models of another country and duplicate them.”
Keep Huawei away
India’s app ban should logically foster domestic competitiveness. However, it is at best a job half done. If India seeks to become self-reliant in tech economy, operatnionalize a globally competitive digital ecosystem and protect national security, it must keep out Huawei — the symbol of China’s coercive, authoritarian state — from its 5G network.
The US has designated Chinese tech giants Huawei and ZTE as threats to national security, countries such as Australia, Singapore, Japan, Taiwan and the US, as of now, have banned Huawei from their 5G network, while nations such as UK have limited it to non-core part of its network. However, media reports indicate that UK may do a U-turn and impose a complete ban on Huawei as a retaliatory measure against China’s decision to impose a draconian legislation in Hong Kong.
Given these crosscurrents, India must hunker down to absorb the cost of keeping Chinese presence from its critical digital infrastructure as much as possible and invest in creating a robust domestic ecosystem. The stakes couldn’t be higher.
On the larger geopolitical game in Ladakh, however, India has got the calibration of economic countermeasures and political signaling exactly right to shift the onus of a response on Beijing. It will be interesting to see what China does to answer India’s ban and Modi’s political signaling.
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