Think U.S-China tensions are bad for business? Try China-India

A signboard is seen from the Indian side of the Indo-China border at Bumla (REUTERS)
A signboard is seen from the Indian side of the Indo-China border at Bumla (REUTERS)


  • Rising tensions between the world’s two most populous nations are showing up in surprising places—including foreign investors’ portfolios

Tensions between India and China are flaring up. Collateral damage is showing up in surprising places.

Investors are used to thinking of U.S-China tensions as the big, scary business risk in Asia. But increasingly, friction between the two largest developing Asian economies will be important too. Just ask the Singaporeans.

Earlier this week, the Indian government banned 54 mostly Chinese apps on security concerns including those published by Tencent and Alibaba. The country previously banned 59 Chinese apps and games, including TikTok and WeChat, in 2020.

Curiously, among the banned list this time is a game called “Free Fire" owned by New York-listed Sea Ltd., a Singaporean company. In fact, Sea was initially a beneficiary of the Indian ban of Chinese games two years ago. “Free Fire" took over as the country’s most popular mobile game after PUBG Mobile, published by Tencent, was banned.

The Indian government didn’t explain why “Free Fire" was banned, though Sea’s link with Tencent could be a reason. The Chinese game giant has been a longtime shareholder of Sea—Tencent now owns around 19% of the company, after cashing out part of its stake for around $3 billion last month. But Tencent doesn’t control the company. In fact, Sea’s shareholders just approved a restructuring plan, proposed last month, that would reduce Tencent’s voting rights to less than 10%. Sea said in a statement that it is aware of the situation with “Free Fire" in India and stressed that it is a Singaporean company and doesn’t transfer or store any Indian user data to China.

All of this is rubbing salt into the wounds of Sea, which has lost nearly two-thirds of its market value since October. Sea’s shares plunged 18% on Monday after the news came out, before recouping some of its losses, though the stock is still down 13% for the week. Analysts estimates India made up about 10% to 15% of Sea’s bookings in games. Sea also operates Shopee, the largest e-commerce platform in Southeast Asia.

While the Indian government has a strong hand when it chooses to ban software companies, it is a different story for hardware. That hasn’t stopped regulators from going after China-linked hardware titans in other ways.

Indian authorities are searching the offices of Chinese technology giant Huawei Technologies on the basis of alleged tax evasion. Huawei’s Chinese peer ZTE and smartphone makers Oppo and Xiaomi were also similarly raided last year.

India has already excluded Huawei and ZTE from its 5G trials, though they have built some of the country’s existing networks. Chinese smartphone brands had nearly three-quarters of the Indian smartphone market in the third quarter of 2021, according to Counterpoint Research. Xiaomi is the country’s biggest smartphone maker with around 22% market share. Kicking them out would be tough, however, given a lack of decent alternatives. Chinese smartphone manufacturers have also been assembling their phones in India, which creates jobs.

India’s growing nationalism, economic heft and rivalry with China seem very likely to be features of the world economy for quite a while. Investors—even in seemingly far-flung assets—will ignore them at their own peril.

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