‘’The Fallout Of India And Chinese APPS’’

1.       Introduction

On February 14, the Indian Government banned 54 Chinese apps, with popular game Free Fire taking a significant hit. Sea, its Singapore-based parent company, lost around $16 billion in market value, about 18% of its total, causing a stock exchange bloodbath. Sea's link to Tencent, a Chinese tech giant, and its stake in Sea further fueled the ban. Sea, committed to Indian regulations, expressed its focus on India's digital economy mission.

Sea, founded in 2009, became Southeast Asia's most valuable company in 2017. While Free Fire witnessed a 72% increase in downloads in India after PUBG's 2020 ban, some analysts suggest it contributed only a fraction to Sea's 2021 video game sales. Sea aims to address the issue, but geopolitical tensions and competition pose challenges.

Efforts to appease the Indian government include a proposal to reduce Tencent's voting stake from 23% to below 10%. Sea's other subsidiaries, especially Shopee, faced scrutiny, and a border dispute complicated matters. The ban affected Free Fire's availability on app stores, but the heavier version, Garena Free Fire Max, remains accessible. India's mobile gaming market, valued at $1.5 billion in 2023, is expected to reach $5 billion by 2025. The situation highlights ongoing tensions between the Indian government and Chinese-affiliated tech companies, with Sea currently facing the consequences of the ban. [1]

2.       Where Does India's Ban on Chinese Apps Fit Into the Global Trade Debate?

The Indian government's recent ban on 59 Chinese apps, enforced through a geo-block, has raised questions about its impact on international trade and potential violations of WTO rules. The move, perceived as a response to the India-China military clash in the Galwan Valley, may be a geopolitical strategy, considering India's trade deficit and limited economic sanction options. However, the ban's economic impact on China seems minimal, with Chinese apps representing a small fraction of its global revenue. A Brookings India report highlights significant Chinese capital influx into India, particularly in tech and pharmaceutical sectors, raising concerns about the ban's limited effect on China's economic interests. Despite China accounting for a small portion of TikTok's parent company's global revenue, the ban could hinder China's tech firms in the vast Indian digital market and set a precedent for other nations concerned about app pervasiveness. China has hinted at taking the matter to the World Trade Organisation (WTO), raising questions about the ban's classification as a domestic regulation or a trade barrier. The regulatory framework for evaluating the ban under GATS or GATT becomes complex due to the evolving nature of technologies not considered during the drafting of these agreements. The distinction is crucial, as GATS sector-specific commitments may create weaker obligations than GATT. The burden on India, if evaluated under GATS, is to justify the ban based on clear state interests and demonstrate non-discriminatory application. The goal is to prevent market distortions in favor of one country or local producers. If GATT governs, recent WTO rulings emphasize that political or economic differences between members are insufficient grounds for emergency measures, urging a careful assessment of India's justifications for the ban. Overall, the ban's implications for global trade and its alignment with WTO rules remain subjects of scrutiny and debate. [2]

3.       Fundamental Rights Undermined

The ban on Chinese apps in India raises concerns about the violation of freedom of speech and expression guaranteed under Article 19(1)(a) of the Indian Constitution. While Article 19(1) provides the right to access the internet, it is not absolute, and Article 19(2) allows the state to impose reasonable restrictions on grounds like sovereignty, integrity, defense, security, and public order. The Supreme Court's precedent in Anuradha Bhasin v. Union of India highlights that an indefinite internet suspension could be an abuse of power. However, the ban seems to have been imposed under the conditions of sovereignty, integrity, defense, security, and public order. The SC's framework in Dr. Ram Manohar Lohia v. State of Bihar categorizes concerns into three concentric circles, with public order having precedence over law and order. The ban's effectiveness in addressing public order concerns related to Chinese apps is questionable, as disinformation issues exist in other apps as well. The SC allows the state to act immediately in a public emergency, with the emergency procedure taking precedence over Article 19(2) conditions. While stakeholders are entitled to notice and a hearing, the ban on Chinese apps may not adhere to the principle of Audi Alteram Partem, raising concerns about bias in the decision-making process initiated by the Home Affairs ministry and CERT-IN. [3]

4.       Impacts of Ban

The Indian government imposed a ban on 54 Chinese apps, citing concerns about unauthorized transmission of user data and activities prejudicial to user privacy, thus safeguarding India's sovereignty. Critics speculate the ban is related to the ongoing border tensions with China. Lieutenant General Harbhajan Singh emphasized the importance of the ban, highlighting the potential security risks associated with Chinese apps.

With India being a significant market for Chinese apps, the ban affects popular platforms like TikTok. The move aligns with India's aspirations to lead in the global IT arena, challenging China's dominance. The ban signals a shift from passive diplomacy, demonstrating that India won't tolerate perceived threats from Chinese technology companies. The economic impact on China's technological growth and its ambition to become a digital superpower could be substantial.

However, challenges arise, including India's continued economic dependency on Chinese products and the broader issue of data privacy, not exclusive to Chinese apps. China has criticized India's actions, suggesting a potential violation of WTO rules. The ban may impact China economically, but it also sets a precedent for other countries concerned about data privacy and app omnipresence. China's response includes expressing suspicion about India's adherence to WTO laws and emphasizing the discriminatory nature of the measures. [4]

5.       Conclusion

In the contemporary world, the digital sector is widely recognized as a crucial driver of economic development, serving as the electronic backbone for both current necessities and future advancements. India, acknowledging the significance of this sector, must carefully navigate the balance between safeguarding the nation's sovereignty and fostering growth in the digital domain. To achieve this equilibrium, there is a pressing need for accelerated research and development efforts, coupled with the formulation of a robust framework to counter potential threats.

While instances like the temporary ban on TikTok in India last year were relatively short-lived, the recent comprehensive ban affecting numerous apps carries a more strategic and national security implication. It sends a clear message not only to the larger Chinese companies operating in India but also to China itself. As India grapples with these challenges, it underscores the importance of proactive measures to secure national interests while actively participating in the global digital landscape. [5]

6.       Citations

 [1] Fallout Of India’s Crackdown On Chinese Apps: Sea Witnesses $16 Bn Wipeout, Available at, https://inc42.com/buzz/as-india-bans-chinese-apps-sea-witnesses-16-bn-wipeout/ (Last visited January 30, 2024)

[2] Where Does India's Ban on Chinese Apps Fit Into the Global Trade Debate?, Available at, https://thewire.in/tech/india-china-apps-global-trade-debate (Last visited January 30, 2024)

[3] The Fallout Of India And Chinese APPS, Available at: https://www.legalserviceindia.com/legal/article-4247-the-fallout-of-india-and-chinese-apps.html#:~:text=Suppression%20of%20Speech%20and%20Expression,ban%20to%20a%20constitutional%20challenge. (Last visited January 30, 2024)

[4] Impact of Banning Chinese Apps in India, Available at,   https://bnblegal.com/article/impact-of-banning-chinese-apps-in-india/ (Last visited January 30, 2024)

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