After the worst border clashes in decades between India and China last month, an anti-China wave is sweeping through India. This comes on the heels of already tense relations after the Indian government in April amended its foreign direct investment policy, requiring investments from countries that share a border with India to get a government approval, in a move widely considered to be an effort to keep a check on investments from China. Last week, the government went a step further and banned 59 Chinese apps, including the massively popular short video app TikTok. In the wake of that, there have been calls to boycott all things Chinese, including cuisine.

Such hot-headed rhetoric overlooks the fact that Chinese companies and their products are deeply embedded in the country. Consider, for example, cell phones that have become ubiquitous with more than 800 million Indians owning one, in what is the world’s second-largest smartphone market. The bulk of them—around 495 million—own a smartphone, according to Counterpoint Research, a Hong Kong-based research firm.

Four of the top five smartphone brands are Chinese and collectively hold 73% of the market. Xiaomi leads the way with a 30% market share followed by Vivo with 17%, Realme’s 14% and Oppo’s 12%. Together with other smaller brands, Chinese players collectively have 81% of the market. Korean giant Samsung, which once dominated the market, has been eclipsed by the Chinese and is in third place with a 16% share of the market. Indian smartphone makers have just 1% of the market, says Tarun Pathak, associate director at Counterpoint.

“Every four of five phones sold in India are Chinese,” says Pathak. “I don’t recall any other market where these players have such a grip.”

The Chinese brands have made inroads with cheaper, better looking and technologically superior phones as compared to local brands. For example, when Indian companies were producing 3G phones, the Chinese brands brought in 4G versions. Soaring demand which has led to a 10% increase, on average, in annual sales of smartphones for the past 4 to 5 years, coupled with import tariffs on phones and their components, prompted the Chinese players to set up factories in India to assemble them locally. Xiaomi’s contract manufacturer Foxconn Technology Group has factories able to produce 50 million units. Oppo and Vivo are not far behind with annual capacities of 45 million and 40 million phones, according to Pathak.

In 2019, of the 158 million smartphones sold in India, 99% were assembled locally, says Pathak. “These players are not just bringing (phones) from China and selling in India. They are providing jobs and training people,” he adds. Pathak estimates that roughly 100,000 people are employed in these smartphone assembly units, directly and indirectly. If these jobs are now in danger, it could result in mass unemployment. “Who else has the scale to hire such vast numbers?” asks Pathak.

Apart from phones, the Chinese-owned factories in India have started churning out other products, such as smartwatches, televisions and gadgets including headphones that can be connected via the internet of things. “The ecosystem is flourishing,” says Pathak, although sales have dipped during the ongoing Covid-19 induced pandemic.

On their part, the Chinese phone makers are staying under the radar. When contacted, Xiaomi and Vivo declined to comment. But in a telling move last month, Xiaomi quickly put up banners at its stores that read, “Made in India.”

Santosh Pai, partner at Link Legal India Law Services, a law firm in New Delhi, with more than 200 Chinese clients, says the current wave will hurt investor sentiment. As per Pai, who analyzed data from the government’s Department for Promotion of Industry and Internal Trade—which tracks each foreign investment coming into the country—for the period from the year 2000 to October 2019 and matched it with the Ministry of Commerce, about 690 companies in India received direct investments from mainland China. (This doesn’t include Chinese investments routed through other regions like Hong Kong, Singapore, Mauritius, Cayman Islands, among others.) A majority of the investments were in manufacturing, he found.

That apart, Chinese money has fueled the rise of several Indian unicorns, such as education app Byju’s (whose founder, Byju Raveendran, is a billionaire with a net worth of $2.3 billion) and payments app Paytm (whose billionaire founder, Vijay Shekhar Sharma, has a fortune of $2.4 billion). 

For now, those employed with the Indian units of Chinese firms are looking at an uncertain future.

“The mood inside is very anxious, no one knows what’s going to happen to them,” says an Indian employee of Bytedance, the parent of TikTok. “Somewhere there’s a hope that this is not a sustainable ban.”