How the India-China Clash will Impact Economic Relations by Opsul blog

India-China Clash: How it will effect Xiaomi, Alibaba and Others

The first deadly India-China Clash in more than four decades adds another layer of uncertainty to companies already reeling from the coronavirus pandemic on both sides of the border.

The India-China Clash that left 20 Indian soldiers dead, along with an unknown number of Chinese casualties, followed a seven-week military standoff between the two nuclear-armed powers.

India-China Clash: How it will effect Xiaomi, Alibaba by Opsule blog
Image Credits > OneIndia

While India in a statement late Tuesday said it remains committed to peace on the border with China, an escalation risks disruption for firms from Alibaba Group Holding Ltd. and Xiaomi Corp. to Tata Motors Ltd. that have customers and investors in two of the world’s biggest economies.

“A gamut of companies importing parts or capital from China will have to find alternative sources quickly if tensions escalate,” said Aneesh Srivastava, chief investment officer at Star Health and Allied Insurance Co. “The makers of white goods, luggage bags, auto components, and some of the e-commerce companies may have to rework their business strategy.”

India-China Clash: How it will effect Xiaomi, Alibaba by Opsule blog

For now, Indian equities and the currency are holding up as the Asian giants have a history of face-offs. They fought a war in 1962 over their 3,488 kilometers (2,167 miles) unmarked boundary.

India-China Clash: How it will effect Big Companies

India and China, which together account for a population exceeding 2.7 billion, are key markets for each other’s firms. Here are some companies that are seeking to expand their footprint in the two countries.

Alibaba operates data centers in India and its “UC Browser” is a popular mobile browser in India by page views, according to its prospectus in Hong Kong listing.

India-China Clash: How it will effect Xiaomi, Alibaba by Opsule blog
Image Credits > Business Insider

Xiaomi, on the other hand, was the top smartphone brand in India by shipments in the fourth quarter of 2019, with 29 percent market share, according to its annual report.

Huawei Technologies Co., the Chinese wireless network giant blocked from selling its equipment in the U.S., got approval from the Indian government last year to provide 5G gear in the world’s number two wireless market.

India-China Clash: How it will effect Xiaomi, Alibaba by Opsule blog
Image Credits > Dintol

The government may prohibit private mobile phone operators from using gear supplied by the likes of Huawei and ZTE, the newspaper cited a senior government official as saying.

Tata Motors, parent of Jaguar Land Rover, this week said it’s seeing the beginnings of a demand rebound in China as the world’s second-largest economy opens up. The success of JLR is crucial for Tata, which is struggling with an Indian sales slump that began even before Covid-19 wiped out demand.

Rising tensions may dull China’s appetite for India’s e-commerce companies as they add to the recent change in policy that puts Chinese investors on a list mandating prior clearance for all investments.

Plenty of India’s e-commerce firms, including ride-hailing startup Ola and food delivery service Swiggy, count Chinese companies including Alibaba, Tencent Holdings Ltd., and funds like Fosun Capital as their investors.

Meantime, companies producing defense-related products may emerge as winners if the standoff prolongs.

Shares of China’s Beijing Emerging Eastern Aviation Equipment Co. and Anhui Great Wall Military Industry Co. soared by their daily limit of 10 percent on Wednesday. AVIC Aircraft Co., China Avionics Systems Co., AECC Aviation Power Co., Jiangxi Hongdu Aviation Industry Co. are among the stocks that rallied.