Despite Government Of India Restrictions, China Is Still Finding Ways To Continue Its Tech Assault; Here's How

The focus of the Modi government around end of July and August 2020 was very clear and unambiguous — that under no circumstance should the country’s safety and security be compromised.

Be it the physical border aggression of the Chinese or the long-term strategy of bleeding India with a thousand cuts by Pakistan or the latest data warfare by the enemy — all of them had to be dealt with with an iron hand.

While the first two were fairly visible or tangible, it was the third route that was far more dangerous — it is still evolving as to how data can be used as a tool in warfare or worse, cripple a country even in peace time by a malicious enemy.

In this backdrop, India banned dozens of Chinese apps — for the simple reason that there was massive leakage of data of Indian users and that it would be better to ban operations than regulate them (especially in the context of enemy moves that were not trust-inspiring.)

In this context, many apps including the much-used TikTok and PUBG were banned.

Not only was there a ban on the apps, there was also severe focus on investment flowing from countries having land borders with India. This was a clear case of ensuring that control of our economic assets, patents, technology and data — via investment or data access — should not fall into the wrong hands.

While the Indian government did take a strong step to send a message that inimical moves by the enemy country will not be dealt with with kid gloves, there seems to be a case of escalation of the matter unthought of earlier — through various other means.

The Chinese firms did a roundabout route — to escape Indian laws and sanctions. The war by other means truly continued with renewed vigour. Apps that were banned directly have made an entry into India through neutral third countries and licenses were granted to firms from neutral countries, which in turn were able to operate in India — with the same modus operandi of data being taken back home to China.

And investments were made in firms in such a way that the multiple layers of firms (real or shell) and ownership with various entities would lead to ambiguity about the real owners.

It is a well stated fact that in a competitive business landscape, “Only the paranoid survive”.

This simply speaks of how dynamic changes can happen and hence, there is absolutely no room for complacence.

The same is equally applicable in the case of Chinese investments and firms. Some of the questions that should nudge one out of slumber are:

1. What if the significant investor, who till now was a Chinese citizen, suddenly becomes a non-Chinese citizen (through valid legal process), but remains a Chinese in action and intent?

2. What if the firms that seem to be fairly broad-based on investors, are in reality controlled by the same dominant Chinese investor in the second or third derivative of understanding?

Take the case study of SEA Holdings, which has two major subsidiaries into gaming and shopping. Tencent has a very significant relationship with SEA on both licensing and investment.

The games are licensed from Tencent, leading to huge royalties and the investment ensures that there is sufficient control and access to data — for uses beyond the accepted norms.

While the fairly well-known firm Tencent may have a “STOP” signal, nothing prevents its investee firm SEA — that repatriates millions of USD as royalty and fee for usage of cloud to the Chinese parent Tencent — from playing smart.

SEA licenses a lot of games from Tencent and pays them $110 million annually as licensing fees and $23 million annually for using their cloud.

SEA has two main subsidiaries, Garena for Gaming and Shopee for ecommerce. Garena's game Free Fire is the #1 game in India.

And like all games, this too collects data (reason why PUBG was banned). Founder of SEA, Forrest Li’s voting share proportion is 54.3 per cent and add to it 23 per cent voting rights of Tencent, leading to over 77 per cent under the “origin of China control”.

Worse still, technically, a Chinese who has changed his citizenship to a neutral country like Singapore or Canada may put this investment as “friendly investment”.

Forrest Li is originally a Chinese, but became a naturalised Singaporean only a few years back. While there is nothing wrong in his becoming Singaporean, the scrutiny team in India needs to go beyond the obvious.

The worst-case scenario is that of the Chinese government moving for the kill via holding a stake — howsoever small — in the tech behemoths.

Till now, while the reach of the Chinese regime into the economic sphere was never in doubt, what is scary is the fact that the Chinese government is now openly taking a stake in these firms.

While the proportion may truly be small, the government surely wields power disproportionate to its investment. And its ability to direct operations, control the firm and access data of all users across the world is not to be taken lightly.

The much-abhorred situation on this front has almost arrived. You can read this in depth here about how China has taken an investment in ByteDance (parent of TikTok) and a Board seat too.

This is indeed a strong enough message for the Indian government to look at the threat in all dimensions. If the war-by-other-means continues by the enemy, we too should ensure defence of our country by all means.

There is no grey area in this regard.