Chinese Tech Companies Eyeing a Return to India Through Alternative Deal Structures
As tensions between China and India continue, Chinese technology companies are finding ways to re-enter the Indian market through alternative deal structures. This comes as investors remain hopeful that these companies will continue to prosper while navigating the trade tensions. Among these is Shein, an online fashion company, which has been pursuing a relaunch in India through a partnership with Reliance Industries, the country’s largest publicly traded company. The Chinese company was among dozens of Chinese apps banned in 2020 due to alleged national security concerns after deadly clashes on the India-China border.
Another significant development is the relaunch of Battlefields Mobile India, a shooter game published by South Korean company Krafton and backed by Tencent. The app was relaunched in app stores last week, a year after it was allegedly banned over fears that Indian users’ data would be transferred to servers in China. By partnering with Reliance, Shein has been able to re-enter the market without having to invest directly in India. This partnership marks a turning point for future adoptions of such structures as Reliance’s stature allowed for high-profile deals.
Furthermore, Krafton could set a precedent for gaming companies looking to re-enter the Indian market as it addressed the concerns of server locations and data security to keep the app on the market. However, despite these recent developments, the regulatory environment in India remains challenging. Regulations implemented in 2020 stipulated that any transaction where the “beneficial owner” was based in China or was Chinese required approval from New Delhi. This has led to a sharp slowdown in negotiations as many potential investors have been discouraged by expensive delays and stringent data storage requirements.
Singaporean Entity: An Alternative to Mainland Investment
However, some investors have found a workaround by routing their investments through other countries such as Singapore. This is because several Indian companies also have holding companies in Singapore, allowing Chinese investors to take corporate stakes in countries sensitive to mainland investment. This strategy, commonly known as “Drying in Singapore,” has helped investors navigate around strict policy regulations.
There has been no official policy change in New Delhi, and limitations on investment from China remain stringent. Investors expect these rules to remain in place, excluding all but the most determined companies. Despite these challenges, a potential opening has been observed in the context of India’s economic situation. Experts suggest that India may not be as demanding as it was before, given the slowdown in tech funding over the past year.
Conclusion
In conclusion, despite the significant challenges, Chinese tech companies are finding ways to re-enter the Indian market, such as through alternative deal structures. Though the regulatory environment in India remains challenging, investors are finding ways to navigate around these strict policies. Routing their investments through Singaporean entities has enabled Chinese investors to take corporate stakes in countries sensitive to mainland investment while avoiding potential regulatory restrictions. Though challenging, these alternative deal structures may present additional opportunities for cross-border business collaborations in the future.
Summary:
Chinese tech companies are finding ways to re-enter the Indian market through alternative deal structures and partnership arrangements. Chinese online fashion company Shein has partnered with Reliance Industries to launch its platform in India, while Battlefields Mobile India has been relaunched after addressing server locations and data security issues. Despite the regulatory environment in India remaining challenging, some investors are finding ways to route investments through Singaporean entities, enabling Chinese investors to take corporate stakes in countries sensitive to mainland investment while avoiding regulatory restrictions. Though challenging, these alternative deal structures may present opportunities for cross-border business collaborations in the future.
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
China-linked tech companies are finding ways to get back into India, giving investors new hope that their businesses can weather trade tensions between countries and fuel new growth.
Online fashion company Shein has been pursuing an alternative deal structure for the relaunch in India in partnership with Reliance Industries, the country’s largest publicly traded company. It was among dozens of Chinese apps banned in 2020 for alleged national security concerns following deadly clashes on India’s border with China.
Battlefields Mobile Indiaa shooter game published by South Korean company Krafton backed by Tencent, relaunched in app stores last week, a year after it was allegedly banned over fears that Indian users’ data would be transferred to servers in China.
Without naming China, Indian Minister Rajeev Chandrasekhar said last month BGM extension it would be available for a three-month trial after addressing “server locations” concerns. [and] data security”.
Shein’s partnership with Reliance – recently approved by the government – is a licensing deal in which the Chinese group will receive a percentage of Reliance’s profits from sales of its apparel rather than investing directly in India.
“This could be a game changer for the future adoption of such structures,” said Karam Daulet-Singh, managing partner of foreign investment law firm Touchstone Partners.
“You need someone of Reliance’s stature and position in the Indian ecosystem to be able to do something that high profile, and not try to keep it under the radar.”
Shein also last year made its Singapore arm its de facto holding company, a strategy known as “Drying in Singapore” which is used by Chinese investors looking to take corporate stakes in countries sensitive to mainland investment.
BGM extensionThe return of could prove to be significant for a gaming industry hit by a number of abrupt bans on popular games for alleged ties to China. Krafton last month declared a ban BGM extensionwhich recorded 100 million downloads last year, had seen growth in its mobile business but had now “put in place several measures to ensure compliance with all applicable regulations”.
“This is something [other gaming companies] can definitely be considered a precedent,” said Ranjana Adhikari, technology partner at law firm IndusLaw.
Lo Shein and BGM extension the developments do not follow any official policy change in New Delhi and severe limits on investment from China remain. Regulations introduced in 2020 stated that any deal where the “beneficial owner” was Chinese or based in China would require approval from New Delhi.
Investors expect this to continue, excluding all but the most determined companies. However, deals like Shein’s tie-up with Reliance, which don’t involve foreign direct investment, don’t require the same approvals.
The 2020 rules have led to a sharp slowdown in negotiations. Investors in China participated in 53 rounds of Indian tech financing worth $2.8 billion last year, up from 72 worth $3.1 billion in 2019, according to data from the provider. Tracxn data.
Indian Finance Minister Nirmala Sitharaman said in March that 54 investment proposals from China and Hong Kong were awaiting government approval.
By contrast, Indian venture capital deals involving a Singaporean entity rose from 68 in 2019 before the rule change to 205 in 2022, according to data from Refinitiv.
Some lawyers and investors argue that routing investments through other countries such as Singapore has helped, despite restrictions on beneficial ownership. Several Indian companies also have holding companies in Singapore.
“There is nothing illegal about this but now, after some successful deals, there is a feeling that having the investor entity based in Singapore rather than China could help with the approval process said a Singapore-based lawyer who advises Chinese clients on investing in India.
Shunwei Capital, founded by Chinese smartphone maker Xiaomi founder Lei Jun, invested last year in Indian market automation platform WebEngage and dairy product brand Country Delight through its Singaporean affiliate, SWC Global. founded in 2020. Shunwei declined to comment.
An Indian official disputed that attitudes had softened but said New Delhi was receptive to the proposals. “There has never been a total ban on anything Chinese,” the official said. “Wherever there is a case that appears to be good for the country, we do what is good for the country.”
However, costly delays and stringent data storage requirements continue to deter many would-be investors.
A Hong Kong-based venture capitalist investing in early-stage companies in India said that while “there has always been interest . . . India is one of the most bureaucratic countries in the world”.
“When investors see it could take more than a year to get approvals, they walk away,” the investor said.
Rajeev Suri, managing partner at Mumbai-based Orios Venture Partners, said a slowdown in tech funding over the past year meant India could no longer be as demanding.
“If you go to the government today and say, ‘Hey, I want to do a [deal]’they’re not likely to shut the door on you,’ she said.
But he added that this had not yet translated into more activity. “If there is no certainty . . . the money isn’t going to start coming back,” she said. “Not too many players can play the regulation game that Reliance can play.”
The director of a Chinese venture capital fund with a Singaporean entity said: ‘I had the feeling that India painfully realized how important land-based investments were to the growth of its start-up industry. up after tech fundraising plummets in 2022.
“Closing the faucets completely didn’t work well.”
https://www.ft.com/content/9613b27a-29f2-457d-8082-bcd086212673
—————————————————-