How Chinese Apps Are Making Inroads in Indian Small Towns

Synopsis
Chinese firms have launched mobile apps directly in India to capture the next generation of internet users.

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After selling a company he cofounded to Alibaba in 2013, Sichuan-born Forrest Chen wanted to look beyond China for his next venture. India was one of the countries on his list of potential markets, which included the US, the UK, Indonesia and Thailand.

"We launched NewsDog in the US in 2015 and got 10,000 users but realised soon that retention was bad because of so much competition," said Chen, CEO of NewsDog. "That is when we decided to come to India, since the number of (digital) media houses here were fewer and people were still using traditional media."

After launching here in 2016, first in English, NewsDog has expanded to 10 Indian languages and has 18 million monthly active users, making it one of the top news apps in the country.

A slew of Chinese companies and entrepreneurs has quickly moved to launch mobile applications directly in India to capture the rapidly swelling next generation of internet users—a demographic global and Indian internet companies too are chasing.

Several of these Chinese apps have catapulted to the top in India across categories such as entertainment (Tik Tok, Vigo Video), news (UC News, NewsDog), shopping (Club Factory, Shein), as well as browsers and data sharing (UC Browser, Shareit).

"China has seen maturity of content apps that are consumed widely there. With (many) Indians just waking up to digital content on their mobile phones, the Chinese have a head start to port their apps to India," said Sreedhar Prasad, partner and head for internet business and ecommerce at KPMG India.

"Especially in tier 2 cities and beyond, the use of apps that let consumers make short videos or edit images simply and share them is catching on fast. Many of the Chinese apps have been able to cater to this," he added.

Of course, this would not have been possible without high-speed data connectivity and smartphones becoming more accessible to millions of Indians than ever before. The number of internet users in India is expected to increase to about 500 million this year from about 481 million in December, according to a report in March by the Internet and Mobile Association of India and consultancy firm Kantar IMRB.

Chinese app company ByteDance has launched Tik Tok (over 1 million Android installations) and Vigo Video (over 5 million Android installations) in India to let users upload short videos. Other Chinese apps in the same space such as Kwai are also raking up millions of users in India.

For these Chinese companies, the attraction of a large market, several untapped use-cases for non-metro consumers, and a growing internet base are good enough to place big bets in India.

Chen said it was the growing internet phenomenon and a lack of disruption by traditional media that attracted him to the Indian market.

"When I went to rural places around Gurgaon with my COO Yi Ma, we found that a lot of people have smartphones and they use it very regularly. However, they are still reading newspapers. That's when we realised there is a gap, which we are trying to fill," Chen said.

Some of these Chinese apps, though, host content some would consider objectionable, and experts say these platforms cannot sustain solely on such material. TikTok was temporarily banned in Indonesia last month due to inappropriate content shared on the app. A highprofile Chinese investor, who did not want to be identified, said these apps may have only a short shelf life in India.

"We have faced some criticism over the content, and we understand that such content harms us," Chen said. "We are trying to cut it out using artificial intelligence." Chinese ecommerce apps such as Club Factory and Shein are also seeing thousands of orders daily from India.

For Club Factory, 35 million of its 70 million global customers are from India. "Our focus is towards a value-based customer, which by default includes tier 2 and 3 cities," Ashwin Rastogi, country head for the ecommerce app, told ET in an interaction last month.

Club Factory is the eighth most used shopping app on Android phones in India in terms of monthly active users, according to App Annie. The company has roped in Bollywood actor Ranveer Singh and Miss World Manushi Chillar for its TV commercials, its first globally.

"These Chinese ecommerce apps have invested on ads through social media to target customers, and since many of their products are cheap, under Rs 1,000, a customer is likely to place an order without the risk of losing too much money," Prasad said.

Alibaba's UC Browser has crossed 130 million monthly active users in India, catering mainly to non-metro consumers. Its users in India constitute 30% of its 430 million monthly active users globally.

Damon Xi, general manager for India and Indonesia, UCWeb, said UC Browser focuses on non-metro users and UC News on users in metro cities.

"We provided data compression technology to make browsing and downloading faster for the users. For instance, there were regions in India where internet connectivity was still improving. In such regions, UC Browser's data compression technology becomes a great help," he said.

For several lending startups from China, India seemed a green pasture after business dried up at home following a crackdown by Chinese authorities on pay-day lending. ET reported earlier this year how several lending startups such as WeCash and FinUp were setting up operations in India.

WeCash's Asia-Pacific head, James Chan, told ET in a previous interaction that the company— with its deep understanding of the lending business based on the "missing middle, new-to-credit, subprime borrowers in China"— saw significant market opportunity in India.

"India and China are similar, and with data and mobile penetration in the country, it is natural to attract Chinese entrepreneurs," said K Ganesh, partner at entrepreneurship platform GrowthStory.

However, challenges abound for these Chinese companies in India, especially in traversing the gamut of languages while also dealing with a regulatory shadow over data security concerns. NewsDog's Chen said many Chinese entrepreneurs realise the difficulties in entering the India market.

"There is no wave," the Chinese investor quoted earlier said. "Only those Chinese companies who have a lot of money can come to India for business."

The proposals of the draft ecommerce policy and the draft data protection bill, if implemented, could also prove troublesome for these Chinese entrepreneurs chasing markets in India.

"(Data) localisation will have a definite impact on Chinese firms," said Sunil Abraham, head of the Centre for Internet and Society think-tank. The data localization rule requires internet companies, fintech companies in particular, to store all their data only within India.

Sandy Shen, research director at technology researcher Gartner, said India's data localisation rule could increase the cost of doing business, as services providers would "need to have multiple hosting relations and take additional steps to consolidate data."

Chinese app makers have had to face tougher hurdles in India. Last year, the Indian Ministry of Defence ordered the Armed Forces to uninstall 42 Chinese apps that it had classified as spyware. Among these apps were UC Browser, UC News, NewsDog, Shareit, Weibo, WeChat, and NewsDog.

Smartphone Xiaomi, with which NewsDog has partnered for sharing content, asked the company to prove that its data was not being shared outside India. "Xiaomi were worried about our name on the list. We proved to them that all our data (from India) is (stored) only in Mumbai," Chen told ET.

Also, late last year, Google temporarily removed UC Browser from its app store after the app came under the Indian government's radar for reportedly sending data to its servers in China.