Chinese investor strategy for India FDI is to fund local players

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The China-India panel at the Emerge event during TechCrunch Shenzhen on Nov. 11, 2019. (Image credit: TechCrunch)

Chinese tech investors are increasingly looking for a way to gain access to India’s untapped potential, and their approach has been to bet on local talent to best approach the market.

“From 1990 to 2014, aggregate Chinese [foreign direct investment] in India was less than $2 billion. From 2012 to 2016 or 2017 that number was $6 billion to $7 billion,” mostly led by China’s tech giants like Alibaba and Tencent, said Dev Lewis, a researcher at Hong Kong-based think tank Digital Asia Hub during a TechNode Emerge panel at TechCrunch Shenzhen on Monday.

Chinese investor interest in India is primarily centered around e-commerce and social media, said Richard Xu, who heads the US operations of Grand View Capital, a New York investment bank.

Unlike US tech giants, Chinese companies often choose to invest in local startups rather than rolling out their products straight from the Chinese market, because of the differences between the two markets.

“[Chinese investors are] not saying let’s be the Facebook of India. They’re saying let’s invest in the local Facebook, let’s invest in a local e-commerce company. They’re giving Indian startups the opportunity to say, we can be Indian while still having the cash flow compared with US companies,” Lewis said.

Apart from being country of 1.3 billion people with different customs and dialects, India has developed its own tech ecosystem, Xu explained. For example, “India has a very strong e-commerce ecosystem based on Whatsapp,” he said, so a WeChat-based model would face significant headwinds.

Presenting another challenge for Chinese entrepreneurs looking to dive right into the subcontinent is the long and complicated history between India and China, the echoes of which still reverberate today. “Security and politics still is the primary lens by which the Indian population, Indian government, view Chinese tech, companies, Chinese money,” Lewis said.