India bans Free Fire from Sea Ltd, ripple effect felt in Chinese stock market

New Delhi, March 2 (IANS): The Indian government’s recent ban on Sea Ltd’s flagship game, Garena Free Fire, among 53 other Chinese apps, sent its shares plummeting on the stock market.

Sea’s stock fell 19% and lost $16 billion in New York on February 14, the biggest decline, although analysts believe India’s earnings could be down 10%.

Ironically, China does not allow outside apps in its country and expects free and fair play for its businesses in India.

Commenting on the matter, Mohandas Pai, Chairman of Aarin Capital, said, “There is no reason for India to be an open space for the Chinese to come and do whatever they want.

“In large Chinese companies, the Chinese Communist Party (CCP) has taken a stand and kicked out the founders. There is total government control and takeover and that means the way the data resides, what they do, how they do, is part of espionage.Thus, Chinese companies do not deserve equal opportunity in the Indian market.

The ban forced JP Morgan analyst Ranjan Sharma to cut the target share price by 40% to $250 and speculate on renewed jitters around the company’s gaming franchise.

The gaming app was the highest-grossing mobile game in India in the third quarter of 2021. Although media claims that its founder, Forrest Li, was born in China but is now a Singaporean citizen, Chinese social media giant Tencent Holdings Ltd is the largest of the company. shareholder.

Although Sea went public in 2017, the company has quickly become Southeast Asia’s most valuable company, primarily due to its potential to expand its platform for gaming, e-commerce and mobile. financial services.

Angus Mackintosh, Founder of CrossASEAN Research, said, “India is seen as one of the next major growth engines for Sea’s e-commerce and gaming arm outside of Southeast Asia.”

Investors are also concerned that India could potentially ban Shopee, the second pillar of Sea’s business.

Beijing has expressed serious concerns over New Delhi’s banning of Chinese apps on security grounds, seeing the act as “unfair treatment” for Chinese investments against other foreign investors.

India is a major source of revenue for Chinese companies and since these apps are banned, they could lose substantial revenue.

According to Reuters, a brief ban on TikTok in 2018 impacted the company with a loss of $15 million per month.

Apart from security issues with storing their data, there are also allegations of arm twisting and abusive behavior such as predatory pricing and market monopolization by Chinese companies.

China is different from the United States when it comes to data security. Data is not secure in the hands of Chinese companies. Even for Chinese private companies, Chinese officials have access to data, including sovereign data.

By banning the apps, India has sent the message that it is no longer a victim of China’s “chomp and bargain” policy and will renew the terms of engagement.

The modern world recognizes the importance and growing role of digital sectors as key drivers of economic development.

India is one of the major and rapidly growing data application markets. India is also valuable for app companies due to its cheap and accessible internet service and large consumer base.

Beijing wants to take advantage of this both politically and strategically, while keeping its own market closed. Fairness ensures that Beijing’s reaction should not be viewed solely from its side of concerns, but from India’s perspective, primarily concerns over privacy and sovereignty.

The same concerns have also been expressed by other countries around the world.

There are 658 million internet users in India (January 2022) and internet penetration is over 47% of the total population.

Additionally, there is a rapid shift in advertising for businesses in India towards the digital mode. India’s digital advertising industry recorded 35% growth to reach Rs 21,353 crore at the end of 2021 from Rs 15,782 crore from the previous year.

According to McKinsey’s “Digital India” report (March 2019), digital applications could proliferate in most sectors of the Indian economy and by 2025, the main digital sectors could double their level of GDP to reach 355 to 435 billions of dollars.

Additionally, it would create an additional $10 billion to $150 billion in value from digitalization sectors (including agriculture, education, energy, financial services, healthcare, logistics, and retail). retail) as well as digital applications in government and labor markets.

India simply cannot afford to outsource this huge market. Given its increasing technically capable human resources and rapidly growing startup ecosystem, the space could be very fertile for the government’s “Aatmanirbhar Bharat” mission.

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