This Week in China: a circuit break in India, and why is Tencent playing cute?

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Top News and Views

$6 billion. This is the amount of money that Bytedance could potentially lose in one single market: India. On June 29, India's Ministry of Information Technology announced that it is banning 59 mobile apps that are developed by Chinese companies, amid alleged privacy concerns and fear of “prejudicial to sovereignty and integrity of India, defense of India, the security of the state and public order”. Among the list, there are several of Bytedance’s most popular apps, such as TikTok. Right before it was taken down, TikTok ranked No. 3 on Google Play India and its revenue has entered into Top 20 in this fast-growing country. India is TikTok's biggest foreign market, with an estimated 120 million active users.

(??Youths act in front of a mobile phone camera while making a TikTok video on the terrace of their residence in Hyderabad on February 14, 2020. ??: AFP via Getty Images)

At the same time, Chinese tech giants such as Tencent, Baidu, and Alibaba have lost some of their market grounds in this round of taking down, but not as severe as Bytedance. “Among the 59 apps, 15 of them have been taken down before the banning… For the rest of 44, 26 among them are ranked lower than 1,000 in Google Play Indian store with their member base neglectable. The resting 18 apps are some of the most successful Chinese apps in India.” Observes Liu Gang, the investment director of Alpha Startups Fund. “The only app with the revenue higher than TikTok in India is PUBG (Player Unknown’s Battleground) backed by Tencent, which is not on the ban list.”

“In the short term, the biggest impact on Bytedance will be on DAU (Daily Active Users) if its flagship product is banned in India, the second-largest country in population.” Remarks Yuanpu Huang, founder of EqualOcean, tech investor and a LinkedIn Influencer. “As a major competitor of Facebook, it’s a big setback for Bytedance in terms of this important metric.”

(??Roposo seems to be an alternative when TikTok is banned in India. ??: AFP via Getty Images)

The banning is not coincidental, per BBC, as China and India have engaged in border disputes in later June. And it’s not the first time Chinese apps are faced with such accusations. “It’s a reverse of the market, and the wartime calls for Chinese CEOs to rethinking about the global market and their priorities. ” Alex Jiang, Founding Partner at Alpha Startup Fund shared in a post. “The nature of Chinese companies’ involvement in the Indian tech industry is smaller in the total amount of money, but deeper in the depth… TikTok’s infiltration rate in India is 30%. While the Dailyhunt, a news aggregation app invested by Bytedance, passed 190 million DAU last month. It’s not over: Chinese smartphone makers take up 73% of Indian market share.” Alex pointed out.

And the blade has two sides: "The thousands of TikTok influencers who were making a living off the platform and the many Indian traders and businessmen who need to connect to people in China and do that over WeChat —this cuts them off." tech policy expert Prasanto K Roy told BBC. “The Indian government didn’t release written notice before the order is given, nor there was a hearing to address the issue. No mention there was no concrete proof. At the same time, the companies behind these apps are providing jobs for tens of thousands of Indian people. If the banning does take effect, these people’s jobs will be in jeopardy.” Atul Pandy, a partner at the law firm Khaitan & Co told ZXWPost, a website covering Chinese companies going abroad.

(??Indian mobile users browses through the Chinese owned video-sharing 'Tik Tok' app on smartphones in Amritsar on June 30, 2020. ??: AFP via Getty Images)

Some local Chinese news outlets observed that the Modi administration actually retaliated China in a very discreet and careful manner: by only banning mobile apps, while still allowing other Chinese companies to operate normally in India. I can’t say for sure if this is the end, but the Indian government did give me this feeling that they don’t want to break everything and draw both sides back to the 1960s. Neither does the Chinese government. Just like Alex Jiang said, “for two countries with a $90 billion bilateral trade per year, the conflict is the last thing on the list”.

By the way, ever since the collision at the border and the banning of apps, Chinese media are more frequently publishing articles on India. Among all kinds of demonization, vilification, and nationalism outcry, a piece published by a Chinese photographer became viral this week. Sui Shui, a traveling photographer now living in Coimbatore, married to a Ladakh woman, shared various experiences of him settling down in this major city of Tamil Nadu. It was quite a reading, in Chinese of course. I would like to quote the following part as the ending of today’s topic around Sino-Indian relations:

The Indian government has been seeing China as an imaginary enemy, and Indian media are working day and night to vilify China. However, for most of the nice and kind-hearted Indian people, they have never seen a single living Chinese since they were born.

(Screenshot of Sui Shui's article on his experience in India, reprinted by Huxiu's WeChat account)

What’s your take on the banning of Chinese apps, and on the broader Sino-Indian business landscape? Please let me know in the comments.

Also in the news

Tencent had a bad week, by being in the center of nation-wide ridicule. News broke on Monday that a Chinese court had frozen Lao Gan Ma assets worth RMB 16.24 million ($2.3 million) following a complaint filed by Tencent, claiming that the well-know chili sauce maker failed to pay the advertising fee to promote its spicy sauce in a co-branding campaign partnering with QQ Racing, an online game developed by this most valuable Internet giant in China. 

Almost immediately, Lao Gan Ma put on a statement denying the collaboration on Tuesday. “Lao Gan Ma had never signed a marketing agreement with Tencent and didn’t assign anyone to do so on our behalf.”

On Wednesday the story took a turn when Guiyang police arrested three people accused of scamming Tencent by pretending to be representatives of Lao Gan Ma and signed the contract with Tencent with a fake company chop.

For context, the company chop stands for the ultimate legal effectiveness of documents in China’s law system, even it is widely criticized by law workers for being easy to fake. “The 2,000-year-old tradition may seem quaint. In China, who controls the chop controls the company.” writes The Economist. 

(??Lao Gan Ma brand chili seasoning in the supermarket. Hangzhou, Zhejiang Province, China, June 30, 2020. ??: Getty Images)

That’s embarrassing, but Tencent PR department acted very quickly. It shared a Weibo post along with the hashtag “Tencent offers 1,000 bottles of Lao Gan Ma for clues on the swindlers.” Tencent also uploaded this video clip on Bilibili, a video platform it invested and seen as a potential YouTube peer in China, to mock itself as the “silly penguin who ate fake chili sauce”, which uses the flightless bird as the company mascot.

(??Screenshot of the viral video in which Tencent put a penguin's head on Chaoyue Yang's head to mimic apologizing to the public for being "naive and silly". But judging from the comments, people are far from really buying it...)

On the suspects’ side, it turns out that the three arrested people were eyeing the free gifts with free gifts that came with Tencent’s marketing campaign -- digital codes that can be redeemed for virtual items in online games. Officers said the accused impersonators were hoping to re-sell these codes for profit.

These are all of the developments of the incident this week. But many people, including me, have sensed weirdness in this laughable case, including:

1. For a top-tier Internet company like Tencent, it’s abnormal for its multiple departments to sign-off such a suspicious contract. Besides, such collaboration involves complicated documentations regarding fiscal, financial, intellectual property, and legal issues. And the swindlers, in this case, passed all the verification, the onsite visits, document exchange, email discussion, etc. “How would they be cheated in this way?” A lawyer told The Paper. 
2. The marketing campaign was actually quite successful. Tencent had invested resources including design, virtual gift, live streamer, and website decoration materials. It has been hotly discussed among gamers. Does Lao Gan Ma actually see it? Or did the chili sauce maker intentionally chose to ignore it, and came back to declare when comes to the payment?
3. The purpose of the scam is questionable since the gift code of the QQ Racing is mostly worthless. For a gamer like me, it’s no compare to PUBG or League of Legends, both backed by Tencent. The gain of the three swindlers from this incident is super low, while the risk is sky-high. Why?
4. Is Tencent so influential on local courts and authorities, that it can freeze anyone or any company's assets whenever it deems necessary? In several posts shared on social media platforms, Bytedance's VP fiercely attacked Tencent for being "a bully" on competitors, who hires official clerks to join the company in order to influence the policy and media. If it was an obvious secret among tech giants, why does this VP bring up the issue at this time?

The answers remain unclear, but Alibaba always got you covered:

Well, that's all for this week's magical-realism top business stories in China. Hope you have a wonderful rest of the week. See you in the comment!