The US side is putting in place measures designed to constrict the supply of dollars to China, including through delisting Chinese companies on US exchanges. The Modi app ban will compress Chinese company valuations further, which will fall more and more with every new entry into the app ban bandwagon

by MD Nalapat

New Delhi: Commentators less than receptive to Prime Minister Narendra Modi have been pointing out that trade with India forms only a small part of China’s overall trade, and hence that any trade war initiated by India would prove futile. They seldom mention the fact that India accounts for the second largest trade surplus of the PRC, next only to the United States. And critics of Modi may not accept (or even be aware of the fact) that the move to criminalise the use of as many as 59 Chinese apps that are of everyday use in India could potentially shave off hundreds of billions of US dollars from the valuations of Chinese companies. While de-linking of hardware from China may take longer (although security considerations mandate that such a process start), apps are a different matter. Some may argue that VPNs would enable users to access the banned apps, but this would be used by few. Most would switch to other, more accessible, apps. The replacement of the banned apps by domestic alternatives would be a matter of weeks, not the months or years needed to replace hardware, for example in telephony systems. In India, careless security has resulted in ZTE and Huawei dominating the back ends of the entire mobile telephony network, a situation that calls for immediate remedial action. Over the last decade (an eternity of time in the digital age), both societal implications as well as value creation have been far faster and more profound than in the case of hardware such as 3G, 4G or 5G. Most of the entities developing and marketing apps valued at several billion dollars each were not even around before 2009. WhatsApp and Uber came on the scene that year, WeChat in 2011 and TikTok in 2016. Had the governance system in India not been as prone to sabotage by hostile alien entities as it is (given the ease of litigation and the forests of regulations needing to be navigated), several apps designed in India may have been world beaters, rivalling their international competitors and generating millions of jobs locally in the process. In this way, the mass culling of innovative enterprises that took place during India’s “Foreigner First Decade” would get remedied to an extent.

Extend Ban To Other Apps

The list of 59 banned Chinese apps initially announced under the direction of the Prime Minister will need to get expanded to other apps that may later be discovered to be controlled from within China. This would immediately deprive the PRC of access to metadata of about a billion individuals. Such a move would severely affect progress developing Artificial Intelligence algorithms, technology of immense value in both civilian as well as military applications. Under the personal supervision of President Xi Jinping, who has made global leadership in technology a primary objective of his period in office, the past four years have witnessed China overtaking the US in both AI patents as well as the commercial exploration of AI systems. Given the use that AI can be put to in the spheres of intelligence and military operations, the Modi app ban—especially if followed by other countries with large smartphone-enabled populations—could have the effect of reversing PRC success in AI where its existential competitor, the US, is concerned. Who wins the Knowledge War will prevail over the other, and access to Indian metadata is a necessary component for such a victory. This had been freely available to China until Prime Minister Modi decided it was time to show that there would be a heavy cost for the CCP to bear if it continued to indulge the PLA’s GHQ Rawalpindi-seeded phobia about India.

Mapping out populations on demographics, ethnicities, lifestyles and dialects is helpful both in commerce and in conflict, and requires the access to varied populations that Chinese software and hardware are designed to penetrate. Although 59 Chinese apps have been banned, there may be other major apps that are in fact Chinese, although technically belonging to a third country or to Hong Kong. After the security legislation became law in Hong Kong on 1 July 2020, the distinction between the PRC and the Hong Kong Special Administrative Region has been almost completely eliminated in any practical ease. Now that Prime Minister Narendra Modi has shown the way, agencies in India will need to identify other apps where the servers are in PRC control, despite the apps technically originating in another country. And there are security challenges outside the virtual. Undersea cables carry voice and data across vast distances, and these have been subject to snooping through clandestine physical access in the past. The app ban of the Prime Minister is only the first step of a long chain of steps that need to be taken to ensure that the security of India is not compromised through being accessed by a country whose military is hand in glove with GHQ Rawalpindi, a fulcrum of terrorism across the world.

China’s Waterloo Will Be Pakistan

Just as Afghanistan was a Waterloo for both the USSR as well as later the US, Pakistan is likely to be a similar quagmire for China within a relatively brief period of time. The folly of going along with the requirements of GHQ Rawalpindi will soon become evident to perceptive scholars and analysts in the PRC. Many there do not accept the PLA policy of trust in the Pakistan army and of permitting GHQ Rawalpindi to stamp its influence on policies directed against India in a manner that goes counter to the interests of the 1.4 billion people of China. It seems only a matter of time before an objective cost-benefit analysis gets done within the CCP on the relationship between Pakistan and China, including its effect on relations with India. However, as yet, there is no evidence of such a shift in policy. China and Pakistan are joined at the hip in the military sphere, in the same way as China and Russia now are under Putin and Xi. Ties with China have crossed a point of inflexion as a consequence of PLA activity on the Sino-Indian border since 3 May, especially the Galwan encounter on 15 June. On the Indian side, the tardiness shown thus far in the essential task of marking India’s territories in Ladakh and elsewhere that are susceptible to nibbling by the PLA’s “forward policy” will now hopefully be a thing of the past, just as the earlier neglect of border access infrastructure had been till PM Modi took up the matter and rescued it from the obstructive attitude of elements in North Block, who have remained wedded to Morarji Desai’s policy during his 1958-63 stint as Finance Minister. He starved the Ministry of Defence of necessary funds, as in the view of him and presumably Prime Minister Nehru, “conflict with China is impossible in our lifetime”. Desai was shown to be wrong in 1962, when the PLA marched across the frontier. This is still being kept undefined by Beijing despite multiple rounds of negotiations with India on the subject. Till now, until PM Modi intervened, there had not been any visible cost to Beijing of such a policy of stonewalling a task so essential to stable peaceful relations with India.

Chinese Companies’ Valuations Fall

Prime Minister Modi’s move banning 59 Chinese apps is of immense significance, and every country that joins the ban will wipe out more and more of the value of the Chinese entities involved. And this is a trend-setter that is likely to be followed by other countries, including the United States and the other four members of the “5 Eyes” intelligence combo (to which India seems on the way to be belonging to, as the sixth “eye”). Over the past decade, while the People’s Republic of China (PRC) has itself created a wall preventing external apps and internet applications from entry into its market, the Chinese Communist Party (CCP) has encouraged a handful of “national champions” to reach globally competitive standards and join the list of the top tech entities across most continents. TikTok, for example, had nearly 840 million users worldwide including 210 million in India, while its parent company ByteDance was valued at over $100 billion. The India ban will knock the bottom off both these calculations, leaving the company at risk of closure, should other countries follow the example set by PM Modi. The perception within the National Security Council and the Department of Commerce in Washington is that the Chinese side intentionally hid the fact of the Covid-19 pandemic while signing the Economic & Trade Agreement with the US early in 2020, by which time the disease was already being documented in Wuhan. The US side is therefore putting in place measures designed to constrict the supply of dollars to China, including through threats to delist Chinese companies from US exchanges. The Modi app ban will compress Chinese company valuations further, which will fall more and more with every new entry into the app ban bandwagon. Who remembers tech giants of the past such as AOL or MySpace? The ban may result in current PRC champions heading in the same direction. The apps ban is unique in that it targets the metasphere, which is today getting dominated by the PRC, and which seems to have traditionally been outside the major fields of interest of security agencies in India. This is incomprehensible, as online gaming (within the metasphere) is 74% controlled worldwide by Chinese entities, and this pastime has become the reality of the present generation in countries across the world, including the US and India. Tencent, a wholly Chinese entity, controls online products that are immensely popular among hundreds of millions of people, and which can suck up personal data with every minute of use by these individuals across the world. Once WeChat and other apps used to communicate with the Chinese in the PRC get banned in major economies, and because WhatsApp, Facebook and LINE are banned in China, there will be fewer ways for Chinese entities to seamlessly communicate with outside customers or suppliers. This will severely impact business unless Facebook, Google and other foreign systems are allowed in the PRC. Despite his friendly feelings towards President Xi, President Trump is feeling the pressure of many in his team to follow the example set by Narendra Modi.

How WeChat And TikTok Function

Among the apps now banned in India is WeChat, which has been used to give the CCP point of view in a manner that is often subliminal and subtle, such as by the display of maps that do not reflect actual legal or factual situations on the ground, including on borders. China has for long banned foreign chat programs from operating within its territory, such as LINE or WhatsApp, but is protesting a similar ban in India of its own products. This again in a context where Twitter, YouTube, Google, Facebook and other such global tech giants are barred from use in China. Backchannel efforts have long been ongoing by some of these tech titans to genuflect to the CCP and thereby get the ban lifted, although thus far efforts at ingratiating themselves with authorities in the PRC have proved a failure. The banning by PM Modi of China’s own communications program (WeChat) within India is the first time this has taken place after it was banned in Iran in 2013, and is likely to be a trend setter among major democracies such as the US, Germany, Japan, the UK and France that are eager to protect their data and ensure that China does not emerge the champion in AI and its applications. Of the top ten unified apps downloaded in India during 2019, six are Chinese, three are from the US and only one (Hotstar) is from India. In 2015, there were two from India, five from the US and three from China. The importance of India to the online industry in China is clear from the fact that downloads of Chinese products have risen fastest in India as compared to other large countries such as Indonesia, Brazil, Nigeria and Egypt. Chinese apps have overtaken US apps and left Indian apps far behind since 2015. A few years more, and this tech space in India would have been almost completely dominated by Chinese companies.

Among the hardest hit by the app ban is TikTok, which has more than 200 million active users in India, or 4 out of every 10 of its users. While it is technically a social media app, experts warn that it can very quickly be used for surveillance purposes. It can be remotely controlled and can track an individual’s activity and identity if a smartphone is used, which in India is most likely to be a Chinese model, given the dominance of that country in the hardware market in this country. A single entity, Xiaomi, controls a third of India’s smartphone market. The company has not hidden the fact that it relies on a strategy of “building the ecosystem” through its users. This means that they collect a huge trove of data about each user through items such as refrigerators, clothes washers, television sets and even weighing scales, besides of course the ubiquitous smartphone. Their stated goal is to run Artificial Intelligence analyses on its users better than any other electronics companies, thereby posing an obvious risk to data security in a context where not just strategic but even tactical planning seems to be jointly carried out these days by GHQ Rawalpindi and the PLA. This has significance because a company such as Tencent can listen to everything its WeChat users say. In the case of Alipay payment app of AliBaba (which has significant say over some entities operating in India that are as yet outside the ban just announced), a single spend can result in more than 200 data points getting collected for Artificial Intelligence analyses. Surveillance and the collection of data has therefore become an important by-product of Chinese software companies, which is the reason why they are being given so much attention to by the CCP under the tech-savvy Xi.

Invisible Transfer of Data

Given the carelessness with which both officials and non-officials in India handle software and hardware that have immense snoop capability, it would be no surprise if there have been few surprises from India to countries with an advanced capability in metadata collection. Advance information, whether political, social, economic or even security related would have flowed through the invisible transfer of data. India will need to build up its own wholly owned national champions (anonymity through the Participatory Note route can no longer be permitted in such sensitive sectors) as otherwise metadata will continue to flow out of India to countries that are using the same to ramp up their Artificial Intelligence (AI) capabilities. At present, the US is still ahead, but China has been catching up fast. Interestingly, AI requires not so much human intelligence as data from humans for getting developed, and after China, India is the biggest source of such data. Because of the absence of policies designed to protect metadata till some recent steps by Prime Minister Modi, thus far such data has mostly gone to two countries, the US and China, with countries such as France in this list thanks to penetration of the Indian software and applications market. Aadhaar for example is a prime example of an oceanic trove of metadata, and a reckoning of where its data has gone would be of immense value in understanding the scope of the security challenges being faced by India. Any lack of cold-blooded objectivity in judging risks would do immense future harm, just as it has done in the past. Indian champions need to be developed, for the brainpower exists for this within the country, if protected from regulations and administrative practice that seem designed to favour external competition. The manner in which patents are being looked at, for example, needs a comprehensive relook during Modi 2.0. Even during Modi 1.0, the effect of several regulatory moves on patents was to handicap domestic entities and give preference to alien competitors. It is clear from Modi 2.0 that the Prime Minister has mastered the processes of governance and that continuation of UPA-era policies favouring foreign competition will no longer be permitted. The pioneering move by India of beginning the process of delinking India from China in the matter of technology needs to be followed by the US. Secretary Mike Pompeo’s strong words are of little value unless matched by action matching such language. During the Clinton presidency, it was commonplace to see a combination of strong language and concessional policies co-exist where China was concerned. This was in contrast to India, where Clinton’s policies were brutal in terms of sanctions and the effort to give GHQ Rawalpindi the upper hand in Kashmir. This tilt, at least, has changed, although the reluctance of Donald J. Trump to sanction Turkey for explicitly going against NATO interests is being used as evidence for the proposition that the US (at least under President Trump) is not a reliable partner. Senate Majority Leader Mitch McConnell’s pusillanimous stance towards sanctions on Turkey and other critical issues involving the need for strong action is leading to a trust deficit between the US and its present and future allies that is reaching a level dangerous for US long-term interests, and could cost Trump the White House in November.

China Pays The Prices For PLA Moves

The move to ban 59 Chinese apps by PM Modi, which is expected to be followed by several other steps in the same direction, will do severe damage not only to the valuations of Chinese “national champions” but also to the development of Artificial Intelligence, and thereby substantially slow down China from overtaking the US in this field. Who leads in AI leads the world. This would inevitably be the case, were President Trump to accept the advice of his National Security Advisor and his Secretary of State to put into operation the steps initiated by Prime Minister Modi in India in the crucial combat theatre of the virtual world and the metasphere.

By the Indian Army’s robust response to its GHQ-orchestrated actions in the Galwan Valley and on other points on the Himalayan frontier, the PLA has done incalculable damage to President Xi Jinping’s ambitious drive to make China the numero uno tech power in the world in the next few years.