- July 23, 2020 Innovation
What India’s App Ban Can Learn from China’s Great Firewall
On June 29, the Indian government launched a “digital strike” against China: banning 59 Chinese apps, including the immensely popular TikTok. That move came two weeks after a deadly clash between Chinese and Indian troops at their disputed border.
Ironically, India’s app ban lifted a chapter from China’s own playbook. The infamous Great Firewall (GFW) was first implemented by Beijing to restrict and control information flows. But it also effectively walled-off China’s domestic internet market from primarily American competition, allowing local startups to flourish and to form a domestic tech ecosystem.
There are many differences between China’s GFW and India’s app ban. Most importantly, while the GFW blocked access to the central nodes of the global internet at the time, India today remains open to the leading US tech platforms that dominate much of the globe. But given the leading position Chinese apps had in India—comprising six of the 10 most-downloaded apps in India for 2019—it’s worth asking whether the ban will help incubate homegrown Indian tech firms in the same way the GFW did in China.
Within India, views are divided. Prominent Indian entrepreneurs have welcomed the ban, with the founder of fintech giant Paytm tweeting, “Time for the best Indian entrepreneurs to come forward and build the best by Indians, for Indians!” Meanwhile, some Indian analysts have argued that the ban could end up harming Indian innovation. They point to domestic obstacles to innovation, and the role China has played in facilitating India’s startup ecosystem, including Alibaba’s huge investment in and assistance to Paytm itself.
This analysis will focus on a narrower question: if India continues to block Chinese apps, what can it learn from China’s own experiences?
This not a case for India to pursue this policy of outright bans. Such actions would further undermine the value of a free and open internet, and sever some of the rich human connections between people in China and India when tensions are at their highest point in decades.
Acknowledging these very real downsides, it’s worth exploring the parallels to see if China’s internet controls provide any lessons for India. To answer the above question I will first look at China’s role in India’s tech ecosystem and how that parallels the role US tech played in China prior to 2010. Second, I examine how China exploited its porous GFW and unpredictable blocking of US tech to help cultivate its own ecosystem.
Chinese Giants, Indian Startups, and Rising Tensions
The spark for the app ban may have been the June border clash, but much of the kindling had been building up for years. Chinese technology firms began making major inroads in India back in 2015, when Alibaba’s Ant Financial took a 40% stake in leading Indian payment provider Paytm. That same year, Chinese apps—many of them virtually unknown inside of China—comprised three of the top 10 most-downloaded apps in India.
Over the next five years, Chinese companies’ presence in the Indian tech ecosystem took off. India witnessed a flurry of Chinese venture capital investments, and Chinese smartphone brands like Xiaomi grew to account for nearly 60% of all sales in India. By 2019, Chinese apps accounted for the majority of India’s most-downloaded apps, with TikTok topping the list.
The increasing presence of Chinese companies also led to positive spillover effects for Indian startups. For example, companies like Alibaba and Tencent shared their experience scaling payment systems for hundreds of millions of users in a rapidly developing market, and many Indian startup founders made trips to Beijing to learn about Chinese tech.
But the relationship quickly soured in 2020. The reasons for this are complex, including rising Indian nationalism, anti-China backlash over the coronavirus, and concerns over the security implications of China’s role in Indian business and technology—factors similar to those driving US-China tensions.
In April, the Indian government implemented new rules for scrutinizing Chinese investments in the country. With tensions ratcheting up along the border, a new app called “Remove Chinese Apps” gained popularity in India by encouraging users to delete the offending apps from their phones. (Google later removed the app itself from the Google Play store.)
Tensions came to a head with the border clash in mid-June, and the app ban two weeks later. In its official statement justifying the ban, India’s Ministry of Information Technology initially invoked data security and consumer complaints. Just three days later the agency’s minister made the connection to the border clash explicit in a speech: “We won’t compromise on the issue of national safety and security. India knows how to protect its borders and also knows how to carry out a digital strike.”
Regardless of the intent behind the ban, Indian rivals of Chinese apps quickly capitalized on the new market opening, pushing their apps as the patriotic alternatives and reaping massive new downloads. Some US-based venture capitalists issued open calls for pitches from Indian entrepreneurs who planned to copy the banned apps for the Indian market.
India Today and China in 2010
These trends in India-China tech—growing ecosystem linkages, fierce competition between companies, and a government-imposed block—have strong parallels to the US-China technology relationship from 2000-2010. Understanding the early US-China tech relationship, and how China navigated it in the years after blocking US tech, holds lessons for India if it chooses to continue the outright ban.
In the early days of the Chinese internet, people, money, and ideas from the United States played a key role in facilitating the growth of China’s tech ecosystem. American investors provided funding for Chinese startups, American companies helped train a generation of Chinese technologists, and Silicon Valley’s products and culture served as an inspiration to Chinese entrepreneurs.
Big US tech companies also played the role of the Goliath-like incumbents that sought to dominate the emerging Chinese market. Scrappy Chinese startups fought back, with Alibaba scoring early wins against eBay and Baidu proving to be stiff competition for Google China.
At the end of the decade, that heated competition to win the China market was cut short. The Chinese government had long used the GFW to selectively block websites containing banned content, but during 2009 and 2010 it began blocking the platforms that were becoming central nodes of the global internet: Facebook, Twitter, YouTube, and Google. That effectively pushed the major US tech platforms that trafficked in information and content out of the Chinese market.
But despite blocking the products of many top US companies, China continued to benefit from a range of financial, cultural, and intellectual ties to the US tech ecosystem. That was possible due to two key characteristics of the GFW: porousness and managed unpredictability. That porousness mitigated the economic impacts of cutting off international communication, while the unpredictability—the way Beijing led Silicon Valley companies to believe they might be let back in—helped Chinese companies maintain productive ties with their US peers.
Let’s examine how these approaches minimized the downsides of a walled-off internet and propelled the growth of China’s own ecosystem.
Porous Walls: Access Not Denied
Though the “Great Firewall” conjures an image of an impregnable digital barrier, for much of its existence that barrier was full of holes. In fact, the wall’s very “success” depended on its porousness.
When I lived in China from 2010-2016, virtual private networks (VPNs)—the software that allowed users to scale the wall and have unfettered access to the global internet—were cheap and usually reliable. During major political events or “sensitive” anniversaries, the Chinese government might temporarily tighten the screws on VPN access, but for those with the knowledge and the desire to circumvent it, the wall was more of an inconvenience than a meaningful barrier.
On the surface, that permeability appeared to undermine the Chinese government’s goals, but it actually served them well. It kept the vast majority of Chinese citizens—who could access plenty of Chinese content and never felt the need to acquire a VPN—ensconced within the Chinese internet ecosystem. At the same time, those who truly needed or desired access to the global internet—scientists, exporters, and foreign nationals—could easily access a VPN and handle their business. It was both low cost and simple to get to the other side of the wall.
I’ve compared this internet governance regime to an “authoritarian nudge,” one that minimized the risk of social upheaval among the masses, while also minimizing the economic impact on sectors the Chinese Communist Party wanted to cultivate. For that stretch of time in which China’s internet ecosystem took off, the wall’s porousness felt like a feature, not a bug.
Elusive Market: The Carrot You Never Catch
That porousness was accompanied by another crucial ingredient: the managed unpredictability of the GFW. Central to the success of China’s internet controls was the idea that they might go away any day, allowing firms like Facebook and Google to bring their core products back to the Chinese market. That prospect of re-entering China’s market acted as a carrot that kept Silicon Valley willing to continue building financial, cultural, and intellectual ties with China’s tech ecosystem.
After Google pulled its search engine from mainland China in 2010, Silicon Valley and China entered a period of retrenchment. Many in Silicon Valley were convinced that internet censorship doomed innovation in China’s tech sector, and they were content to wait it out. Yet when it became clear that China’s tech ecosystem was flourishing in spite of the Chinese government’s unrelenting stance on information control, big tech all began angling to get back into China.
They joined Chinese conferences on internet governance, and partnered with Chinese companies to get certain products back into the Chinese market. They exchanged major investments with their Chinese peers, set up research labs in Beijing, and built prototypes of censored versions of their products.
The benefits from these ecosystem-level ties flowed in both directions. American R&D labs in China helped train top Chinese technologists, while US AI research was largely fueled by Chinese-born researchers. Strategic investments helped bolster the competitiveness of companies on both sides of the Pacific. And while many Chinese startups continued to imitate the rising stars of Silicon Valley, US giants like Facebook began learning from, and even copying, Chinese apps like WeChat and TikTok.
But despite these many ecosystem-level benefits, companies like Google and Facebook never got the big prize they were striving for: access to the Chinese market. It wasn’t until 2019, when these companies felt they could no longer move as freely between the United States and China, that they finally realized the market access carrot was one they’d never catch.
Implications for India
So what can India learn from China’s experience walling off and building up its own tech ecosystem? Let’s start with porousness.
Due to the global availability of VPNs, any app ban in India will be porous by default. In 2019, Indian downloads of VPNs grew by 405% to 57 million. But with over 500 million active internet users in India (and 300 million downloads of TikTok in 2019), VPN users still represent a small portion of the total market.
In this environment, banning Chinese apps would likely serve as an effective “nudge” in much the same way the GFW did. While the most dedicated users of Chinese apps—perhaps those who need them for business communication—would choose to install a VPN, this added friction would likely drive the vast majority of TikTok users and creators to other platforms. Those alternative platforms—whether Indian or American—likely won’t have the scale or user experience of the Chinese apps initially. But if China’s experience is any indication, the inconvenience of using a VPN may be sufficient to push most users and creators to a new platform.
On the managed unpredictability of these restrictions, should India permanently cut ties with Chinese tech or try to maintain ecosystem-level ties by dangling the prospect of market access?
Here, India has a lot to lose. Chinese companies, entrepreneurs, and investors have played a major role in building the Indian ecosystem. Along with funding local Indian startups that are competing against US juggernauts, those Chinese-Indian collaborations have led to hands-on engineering assistance, help with strategic planning, and international partnerships.
Knowledge transfer from these ties is especially valuable because it comes from companies fresh off doing what many Indian companies aspire to: scale technology products for a massive, rapidly developing, and mobile-first country, one where much of the population lives in rural areas with limited connectivity and spending power.
At the moment, there’s no other country in the world whose entrepreneurs and investors have succeeded at this like those in China. US companies and investors are currently pledging to pour money and resources into India, but Google and Facebook’s multi-billion dollar recent investments into the politically connected telecom Jio suggest that these resources won’t be going toward scrappy Indian startups.
Given the tremendous financial resources needed to scale and market social networks today, combined with India’s low average revenue per user, local startups will still face a major uphill battle against well-funded US giants looking to fill this gap. When it comes to capital and experience, China’s tech ecosystem and its investors may offer something unique to India that is worth preserving.
Instead, India would benefit from signaling that it doesn’t intend to shut the door on the Chinese tech ecosystem entirely. It could do this in a number of ways: narrowing the scope of the ban to a handful of companies caught in violation of privacy rules; affirming that India still welcomes Chinese investment or involvement in certain categories of tech; or simply allowing the ban to eventually expire and keeping all parties in suspense about future moves.
Taken together, this sounds like a complex set of policies to execute: building digital barriers that remain porous, as well as banning products while sustaining ecosystem ties. Admittedly, that level of policy nuance or precision is a tall order for any government. But regardless of what path India takes going forward, Indian policymakers can take solace in their neighbor’s experience: building the GFW for one purpose (information control) and achieving another one (incubating an ecosystem). Chinese bureaucrats stumbled into some of their most successful technology policies, and perhaps India will too.
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