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Chinese tech companies write off India

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Five months after his business was banned in India, Aaron Li has resigned himself to being locked out of the country forever.

Sitting in his office in the eastern Chinese city of Hangzhou, Mr Li said he had no idea when Club Factory, which sold cheap fashion and homewares to hundreds of millions of Indians through their smartphone, would be allowed to trade again after New Delhi blacklisted scores of Chinese apps.

India this week banned 43 more Chinese apps, continuing a campaign against Chinese tech companies that began in June after a border clash between the two countries left 21 Indian soldiers dead. The so-called “digital strike” has hit large Chinese tech companies including Alibaba, Tencent and ByteDance.

Last year, Mr Li raised $100m from investors to expand in India, as Club Factory hit the top of India’s download charts and was looking at profitability. He said he saw more opportunity in India than in China’s crowded market, describing it as a “blue sea” for ecommerce.

But now he expects to lose most of the investment. The months in limbo have destroyed his business, he said. “If the consumers cannot see you for a long time, they will not come back,” he said.

Mr Li said he was at home one evening when the news broke that India would ban 59 Chinese-owned apps for security reasons, including Club Factory. In a stroke, almost all of China’s top apps were wiped from Indian phones, including the short-video app TikTok, Alibaba’s popular UC Browser and Tencent’s messaging platform WeChat.

“I was at home playing video games when suddenly I received a message saying the Indian government was going to block our app,” Mr Li said, initially refusing to believe that the edict was real.

Aaron Li, founder of Club Factory, does not know when the ecommerce app will be allowed to trade again in India
Aaron Li, founder of Club Factory, does not know when the ecommerce app will be allowed to trade again in India

Soon Mr Li was embroiled in an all-out battle to save his business. The following day, he talked with Club Factory’s board members. “All the investors were shocked too. No internet people have experienced things like this,” he said.

A note from India’s Ministry of Electronics and Information Technology simply said Club Factory would be removed from Google and Apple’s app stores.

Indian telecoms companies soon blocked Club Factory’s domain name as well, which stopped customers from being able to track their orders. Even communicating to his staff in India became a problem, since they had mostly used WeChat to send messages and make calls.

Mr Li drafted a letter to the Indian ministry with his lawyer. “Club Factory has invested approx. INR 650 crores ($87.5m) in India to set up critical infrastructure for ecommerce,” he wrote. “We are in no manner engaged in any activity which is prejudicial to [the] sovereignty and integrity of India.”

But he never heard back. Attempts by his legal team to contact the ministry also floundered. “The order came from [Prime Minister Narendra] Modi,” he claimed, adding that the other affected Chinese companies were similarly in the dark about the situation. “We immediately found it was useless to talk to others. Nobody knows,” he said. 

In Hangzhou, his employees began asking what his plan was. India was their only market and Club Factory’s $100m of monthly orders dropped to zero in July. Within two weeks, Mr Li had laid off half his staff, more than 300 workers, to buy some time.

“We had no better way. You have to make a tough choice. We have to look at the runway,” he said, adding that the redundancies meant the company had enough money to keep going for five or six months without revenue.

Chart showing that the surge in Chinese investment into Indian tech has fallen away. Venture capital investment in India (per quarter, $bn)

More than 200 Chinese apps have now been blocked from the Indian market, with New Delhi adding another 43 apps to its blacklist on Tuesday.

China’s tech companies, once keen to invest in the vast untapped potential of the Indian market, remain in the dark about how long the bans will continue.

Alibaba has laid off employees in the country and curtailed its “innovation initiatives”. Tencent returned the publishing rights for its hit game PUBG Mobile to its South Korean developer in an effort to get it unblocked. 

TikTok has not yet started lay-offs for its staff of roughly 2,000, but a person close to the company said morale was low. “They are doing busy work, team building, planning for how to win back India when TikTok is allowed back in. But we are worried [employees] will start to leave,” the person said.

Another person close to TikTok said Indian officials are stalling while the border stand-off between the two countries continues.

Chinese investment in India

“Until China tensions ease up there is no reason for the Indian government to relax their stance,” said Ganesh Rengaswamy, co-founder of venture firm Quona Capital. “It is not just about business right now, it is social and political.”

Mr Li said there was little the Chinese government could do to help.

A Chinese government spokesperson said on Wednesday: “Since June, India has in four batches blocked Chinese apps on the pretext of protecting national security, the action obviously violates market rules and [World Trade Organization] rules.”

At the end of July, Club Factory received a list of questions from the ministry, including: what services does your app provide, what is your privacy policy, who are the owners, where are your servers located?

“After seeing those, we realised this is not a good sign for us — we realised they didn’t block us for a specific reason,” said Mr Li, who dutifully submitted answers to each question. “Since then, we haven’t heard anything from the government,” he said.

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A spokesperson for the ministry said it was still reviewing the banned apps. “It is ongoing, it is a quasi-judicial process, as per the act, the cyber law division, has issued some notices to them, and submitted their responses,” said the spokesperson. “The judicial process is ongoing.”

Meanwhile, Mr Li and his team at Club Factory have pivoted to building a new app for Europe and the US. Even if India relaxes the ban, he said he wanted an apology before he re-entered the market.

“Why should I invest in a country if it has a risk to fall to zero?” asked Mr Li. “Today, it is Chinese applications, the next day it could be American applications. It is an unknown.”



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Pakistan’s prime minister survives confidence vote

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Pakistan’s prime minister survived a vote of confidence on Saturday after the shock defeat of his finance minister earlier in the week underscored the fragility of the ruling coalition.

Imran Khan took 178 of the 172 votes needed to win after the former cricket captain was forced to seek a vote to prove he had a majority to govern after his finance minister lost his senate seat in a tightly contested race.

The prime minister alleged that around 15 of his lawmakers had been “bought” to vote against Abdul Hafeez Shaikh, who led government negotiations with the IMF, after opposition-backed former prime minister Yusuf Raza Gilani took his Senate seat.

“Imran Khan is not going down in the near-term, but he stands politically weakened by the events of this week,” said Asfandyar Mir, a South-Asia analyst at Stanford University, “he will be playing defence from here on”.

Khan said after the vote he would continue to battle corruption and pledged the economy was on the right track. “We are on the way to economic recovery,” he said.

The vote of confidence was seen as a test of Khan’s popularity at a time the opposition is ramping up pressure on him.

The Pakistan Democratic Movement (PDM), a coalition of opposition parties including the Pakistan People’s Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N), has since late 2020 intensified its campaign for Khan’s removal by banding together and holding rallies across the country.

Leaders of the PDM have accused Khan and Khan’s Pakistan Tehreek-e-Insaf party (PTI) of securing its 2018 victory with the backing of the powerful military. Leaders of the PTI and the army deny the claim.

Analysts said that the vote was unlikely to end Khan’s problems. “Imran Khan remains the prime minister but his government’s agony is not about to end,” said Ayaz Amir, a former member of parliament and commentator. “Increasingly the initiative has gone to the hands of the opposition and Imran Khan is left to react.”

Khan’s election as prime minister was widely seen as marking a new chapter in Pakistan’s politics. His anti-corruption platform was popular among middle class and youth voters, who saw him as a break from politics dominated by the country’s wealthy elite.

But he has faced criticism for his failure to lift the economy — Pakistan is under a U$6bn IMF loan programme — and to deliver on his promise to create an Islamic welfare state.

“The poorer segment of Pakistan’s population have been hit the hardest. The prices of food items have risen sharply under this government and that’s a big issue for our people,” said Shaista Pervaiz Malik, an MP for the opposition PML-N.



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White House warns of ‘large number’ of victims in Microsoft hack

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The White House has warned that hackers may have compromised a “large number of victims” in the US by exploiting recently disclosed vulnerabilities in Microsoft software. 

Jen Psaki, White House press secretary, said on Friday that there was currently an “active threat” from hackers exploiting four flaws in Microsoft’s Exchange email application, which the tech group disclosed earlier this week. Microsoft has blamed a Chinese state-backed hacking group for the attacks.

“This is a significant vulnerability that could have far-reaching impacts,” Psaki said. “We are concerned that there are a large number of victims and are working with our partners to understand the scope.” 

Brian Krebs, a cyber security researcher, claimed in a blog post on Friday that at least 30,000 organisations “including a significant number of small businesses, towns, cities and local governments” had been hacked in the past few days following Microsoft’s disclosure, citing multiple sources briefed on the matter. 

On Tuesday, Microsoft published a blog post in which it said a group of hackers had launched “limited and targeted attacks” to gain access to emails. It also said the hackers had tried to go deeper into victims’ computer systems in order to lurk there unnoticed for a long period of time.

Microsoft has attributed the campaign to a group of Chinese state-sponsored hackers called Hafnium. China on Wednesday denied responsibility, according to a Reuters report. The White House did not link the campaign to any particular country.

It is unclear who has fallen victim to the attacks. Microsoft said that Hafnium has tended to target “infectious disease researchers, law firms, higher education institutions, defence contractors, policy think tanks, and NGOs” in the past.

Late on Thursday, Jake Sullivan, National Security Adviser, said in a tweet that the White House was “tracking . . . reports of potential compromises of US think tanks and defence industrial base entities”. 

He and Psaki urged the government, private sector companies and academic institutions to patch their systems after Microsoft issued fixes for the vulnerabilities. 

The concerns come after revelations in December that a sprawling cyber espionage campaign, likely backed by Russia, had been targeting US government agencies and businesses unnoticed for at least a year.

Authorities are still struggling to understand the scope of the fallout from the SolarWinds hack, which has prompted calls for President Joe Biden to prioritise US cyber security. The Biden administration is now preparing sanctions and other executive orders in response to the hack. 

James Lewis, a cyber expert at the Center for Strategic and International Studies, said it appeared that Microsoft and the US government had uncovered the Chinese attack while “poking about looking for SolarWinds”.

“This is the downside of a big hack by somebody else as it increases the chance that you’ll be found out,” Lewis said. “The Chinese should send the Russians a bill.”



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Polish women count cost of tough abortion curbs

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Even before Poland all but outlawed abortion, Zofia has been thinking about moving abroad. But the near-ban that took effect earlier this year helped her make up her mind: this autumn she plans to move to Prague in the Czech Republic.

“I feel better there, freer, and being a woman there doesn’t make me feel weaker or worse,” she said. “I love my life in Warsaw. But when the [abortion ban was mooted], I thought, I don’t want to live here any more . . . And I don’t want my kids to live here.”

The 31-year-old artist is one of thousands of Polish women outraged by the tightening of the country’s abortion laws which, even before the overhaul, were among the strictest in the EU. Their anger centres on a ruling by the Constitutional Tribunal in October last year, which declared that a 1993 law allowing abortions in the case of severe foetal abnormalities was unconstitutional.

The ruling came into force in January, leaving only two grounds for an abortion in Poland: a threat to the mother’s health or if the pregnancy is a result of rape or incest. Such cases made up just 2.4 per cent of the 1,100 legal abortions in Poland in 2019.

Hundreds of thousands of Poles took to the streets when the ruling was announced in October, and activists have called for another round of protests on International Women’s Day this Monday. Polling suggests that a majority of Poles back some form of liberalisation.

Anti-abortion campaigners, often guided by their religion in what remains one of Europe’s most strongly Catholic countries, say the change was needed to protect the rights of unborn children.

“An unborn child is a separate person, which has its own body and its own rights. A child must not be deprived of the fundamental right of every human being — the right to life,” Kaja Godek, one of Poland’s most prominent anti-abortion campaigners, wrote on Facebook last month.

A pro-life poster in Krakow. Many Polish opponents of abortion are guided by faith in one of Europe’s most strongly Catholic countries
A pro-life poster in Krakow. Many Polish opponents of abortion are guided by religion in one of Europe’s most strongly Catholic countries © Omar Marques/Getty Images

But activists say the ruling will force women to give birth to babies with such severe abnormalities that they have no chance of survival. They also say the government has done too little to help the families of children born with disabilities, who receive only limited support.

“I’m terrified because for me as a woman in reproductive age, it means getting pregnant in Poland became dangerous. And I’m afraid for my sister, for my colleagues and friends, for my relatives and for many other women I meet every day as clients,” said Kamila Ferenc, a lawyer from the Federation for Women and Family Planning, a women’s rights group.

“They will be in a horrible position . . . they have lost the possibility to decide freely on their own, because it’s not so easy to have an abortion outside the system.”

In the past, Polish women who could afford it were able to seek abortions in neighbouring countries with more liberal laws, such as the Czech Republic or Slovakia. But with the pandemic limiting travel, experts say women are likely to turn to the internet to buy drugs from overseas that would allow them to carry out abortions at home. Women are not prosecuted for self-managed abortions carried out before the 22nd week of pregnancy.

“It used to be the case that illegal abortions were through surgical procedures by doctors and back-alley providers. Then abortion tourism rose in the early 2000s after Poland joined the EU. Now we are seeing an increase in self-managed abortions, which can be less of a financial and emotional burden,” said Maria Lewandowska, a researcher into reproductive health at the London School of Hygiene and Tropical Medicine.

Justyna Wydrzynska, from Abortion Dream Team, a group that helps women who want to terminate their pregnancies, said that since the abortion rules were tightened in January, the organisation had received three times the normal number of calls from women seeking help.

“We get around 600 to 700 phone calls a month. Around 100 of them need to go abroad [for an abortion], and for the rest, . . . these are mostly people in need of pills, assistance in taking pills or post-abortion care,” she said.

“Often they are human dramas. Some people approach it in a task-oriented way, others very emotionally. Sometimes it is very difficult.”

Despite the huge protests last year, women’s rights groups acknowledge that as long as Poland’s conservative-nationalist Law and Justice party remains in power, the prospect of the laws being loosened is minimal. But they hope that in the long run, the debate sparked by the ruling will lead to greater support for liberalisation.

“The factual situation of pregnant women is worse. But on the other hand I think we are now on a better track to change the situation than when [the previous government led by the centre-right] Civic Platform ruled and everybody thought everything was all right,” said Ferenc.

“There is more courage in society to speak about abortion. People educate themselves and each other. I think that we now have more solidarity and strength in society to fight for reproductive rights. ”



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