China's Tech Companies Want To Be A Part Of India's Growth Story

China-linked tech companies are exploring new avenues to re-enter the Indian market, raising hopes among investors that trade tensions between the two countries can be overcome.

Shein, an online fashion company, has partnered with Reliance Industries, India's largest listed company, to relaunch its operations in India. Shein was among several Chinese apps banned in 2020 due to alleged national security concerns.

Another significant development is the relaunch of Battlegrounds Mobile India, a popular shooter game backed by Tencent, which was previously banned over data security concerns. These moves indicate a potential shift in the gaming and e-commerce sectors affected by previous bans.

Shein's partnership with Reliance Industries takes the form of a licensing agreement where the Chinese company will receive a percentage of the profits from the sales of its clothing through Reliance, rather than directly investing in India.

This unique structure could set a precedent for future deals in the country, requiring the involvement of influential Indian companies like Reliance Industries.

Shein has also restructured its operations by making its Singapore arm its de facto holding company, a strategy known as "Singapore washing" that Chinese investors are employing to overcome sensitivity to mainland investment.

The return of Battlegrounds Mobile India could have far-reaching implications for the gaming industry, as it has been affected by previous bans on games with alleged links to China.

Krafton, the publisher of Battlegrounds Mobile India, stated that the ban had hindered the growth of its mobile business but had now implemented measures to comply with regulations. The successful relaunch of the game could serve as a precedent for other gaming companies in similar situations.

It is important to note that these developments do not reflect any official policy changes in India, and significant restrictions on Chinese investments remain in place.

In 2020, regulations were introduced requiring approval from the Indian government for deals where the "beneficial owner" is Chinese or based in China.

As a result, there was a notable decline in Chinese tech funding rounds in India. However, some investors and lawyers have found alternative routes by channeling investments through countries like Singapore, despite the restrictions on beneficial ownership.

This approach has facilitated investment in Indian companies and has seen a significant increase in Indian venture capital deals involving Singaporean entities, as reported by the Financial Times.

While there may be a perception that attitudes toward Chinese investments have softened, delays and strict data storage requirements continue to discourage many potential investors.

The recent slowdown in tech funding has made Indian groups more open to investment proposals.