Moneycontrol PRO
Upcoming Webinar:Join us for webinar on Building portfolio with active funds at 5pm today. Register Now!
you are here: HomeNewsOpinion

Global beat | The Chinese dragon may be swallowing India’s new economy — slowly

Ctrip buying into MakeMyTrip is the latest among Chinese firms nibbling at India’s new-age firms. This could set the alarm bells ringing elsewhere

November 22, 2019 / 11:54 AM IST

If you by any chance have thought of the rising Chinese influence on Indian economy, you just can’t be blamed. In fact, such instances are simply growing. Not only is China the world’s manufacturing hub and a major source of funding for development projects in emerging markets, Chinese companies are gobbling up more of the world’s internet economy everyday – where the next phase for world dominance is being fought.

The narrative vis-à-vis India, the second-largest populated and the fastest growing major economy, is not too different. During the past few decades, Chinese firms have set up shop, especially in technology, to emerge among the top companies.

Chinese firms are also increasingly setting their sights on Indian companies -- through fund infusion and acquisitions. The latest to join the list is International buying into MakeMyTrip (MMT). China’s largest online travel company now owns almost half of India’s biggest online travel portal as Naspers decided to cash out most of its holding in the Nasdaq-listed Indian firm.

This is not the first time Ctrip is investing in MakeMyTrip. In January 2016, the Chinese firm had put in $180 million in MMT, and now it has raised its holding by buying most of Naspers’ shares in the Indian travel e-portal.

For both Ctrip and MakeMyTrip, the deal makes sense as they will be working together to leverage the best of the world’s two most populated countries where travel and tourism are growing by leaps and bounds.


Numbers say it. According to a report by Google India and Boston Consulting Group, India’s travel market will be worth $48 billion by 2020, from about $18 billion in 2010. According to Chinese government’s five-year plan, the country aims to generate $1 trillion (7 trillion yuan) through tourism by 2020, from around 4 trillion yuan in 2016.

But what about the larger trend?

Ctrip’s investment in MMT has past precedents this year. In February, China’s ride hailing firm Didi Chuxing pumped in $100 million in Indian hotel aggregator Oyo.

What may make the red flags go up is the fact that the pace of Chinese investments in India has gained traction over the past couple of years. Just in 2018, according to data compiled by research firm Tracxn, Chinese venture capital firms have invested $5.6 billion, up from $3 billion in 2017. This was only $668 million in 2016.

So, who all are investing, and where?

The table shows it all.

Chinese investors

A majority of India’s unicorns are now being backed by one or more Chinese investors.

But there are a couple of things to be considered.

In the era of internet, data is the new oil, and by having ownership in Indian internet-driven companies, Chinese firms or investors own that data. It is alleged that Chinese companies have been stealing data from India while the Chinese government has allegedly been spying on Indian politicians and companies. This, if proved true, is scary. To be fair, this problem is not restricted only to Chinese ownership. Investors or companies from others countries may also have control over data of Indian citizens, and the government’s draft ecommerce policy aims to put a stop to that.

Importantly, Chinese firms and investors have primarily invested in consumer-facing companies in India. This gives them access to India’s income data and consumer behavior among other things which could potentially be sensitive.

Besides, Chinese companies and investors have their own style of work which they can easily infuse into the companies they have significant stakes. If that happens, it may not be long when Jack Ma makes Alibaba investees follow 12-hour work shifts six days a week, which he said was a blessing, in India.

But as said in an October 2017 piece, “Chinese firms and investors are strikingly bad investors abroad” because of many reasons including its own restricted home environment.

The only respite, however, would be if Chinese-invested Indian companies get access to China – the world’s largest consumer economy. But that’s not probable at least in the short to medium term.

While it might be too early to say whether Chinese investment in Indian startups is good or bad, if the trend stays, the day may not be far off when India’s new economy will be at the risk of being overwhelmed by that all-pervasive China hand.

Take guard, folks.
Sounak Mitra is an Associate Editor, Moneycontrol. He has been writing on corporate issues and policy for more than 15 years, having previously worked with Mint, Business Standard, Mergermarket, The Telegraph and The Times of India.

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark