The Indian digital economy is a vibrant and promising driver of growth, supported by innovative startups, applications and a robust user base. The growth of India’s platform applications in a variety of sectors like fintech, food delivery, entertainment, ride-hailing, e-commerce and instant messaging was a unique phenomenon; they were partially supported by significant investments from Chinese Venture Capital (VC) firms. Before geopolitical tensions and the breakdown of India-China relations, Chinese investors like Baidu, Alibaba and Tencent, along with others, enjoyed a significant presence in India’s digital economy landscape. However, their presence was short-lived as Chinese investments ran into data security concerns, breakdown of political relations and tightening of investment screening. Their rise, retreat and renewed interest over the last decade offers a unique insight into China-India exchanges rooted in the digital economy.

The Growth Opportunity

Several factors drove Chinese VC interest in India before 2020. The sheer market size of 1.4 billion people and the world's second-largest internet user base presented a massive opportunity for Chinese investors seeking new markets. Moreover, the demand for digital services was expected to follow the trajectory of China’s digital economy, which grew strongly on the back of startups and unicorns offering services on digital platforms and applications. There was also a strategic element at play. By investing in Indian startups, Chinese firms would gain valuable insights into the Indian market and consumer behaviour, which could be used to adapt their other products and services for the Indian market. For Indian companies, Chinese VCs didn’t just offer funding, they were crucial sources of domain expertise in digital services. Chinese VC players like Fosun, Shunwei and Ant Group, along with companies like Tencent, Alibaba and Baidu invested across the board in Indian startups offering financial services, ride-hailing, food-delivery, e-commerce, instant messaging, gaming and entertainment.

Chinese VC firms focused on achieving financial returns on their investments in Indian startups. Just between 2016 and 2019, Chinese investments in Indian start-ups grew by 12 times, from USD 381 million to USD 4.6 billion. Of the 24 unicorns in India at the time, 17 were backed by Chinese investments, majorly focusing on e-commerce, transportation and fintech. Forums like the Startup India Investment Seminar held in Beijing in 2016 saw 12 Indian startups participate in the process, of which 4 secured funding from Chinese sources. Alibaba, for instance, invested in Snapdeal and PayTm in 2015, XpressBees in 2017, Zomato and Big Basket in 2018, making large bets in the startup ecosystem in India. It also made smaller investments in companies like video analytics firm Vidooly, parenting social networking app Healofy and acquired a majority stake in ticketing app TicketNew. Tencent adopted a different strategy, making many smaller investments in companies like Flipkart, Ola, Swiggy, Byjus, Dream 11, Policybazar, Hike, Udaan, Practo, Gaana, Niyo, Khatabook and MyGate. The large and diversified portfolio of Tencent’s investments revealed a comprehensive interest in the digital-facing businesses emerging in India’s economy.

Chinese investors like Fosun focused on tech startups like ixigo, Delhivery, LetsTransport, MakeMyTrip, Mylo, Kissht and Kredily, opting not to compete with large investors like Alibaba and Tencent. They invested in travel, transport and other less saturated sectors of India’s digital economy. Shunwei Capital also followed a similar strategy, with CEO Tuck Lye Koh stating that they were interested in business models that are light and low on offline infrastructure. Shunwei-led funding rounds in Sharechat, Upwards Fintech and ZestMoney targeted fast-moving sectors, while participating in funding rounds for Samosa Labs, Vokal and even Koo’s parent company Bombinate Technologies.

The scale and depth of Chinese VC investments suggested a serious interest in benefitting from the digital economy boom in India. The investment environment at the time supported the forays into India, and created a culture of shared business development. Indian companies and entrepreneurs worked with Chinese investors and companies to build capacity and leverage China’s expertise in digital economy development. The mutual interest driving such economic linkages were disrupted after the border clashes in Doklam and Galwaan, leading to dilution of investments and retreat by Chinese VC firms.

The Retreat

The investment environment after the Doklam and Galwaan clashes drastically changed the way Indian and Chinese business interests could engage. The Indian government’s decision to ban over 200 Chinese applications in India after the Galwaan clashes was impactful. Based on concerns about data security, ownership opacity ad strategic dependency, it limited the participation of Chinese companies in India’s app ecosystem. The government’s investment screening policies, outlined in Press Note 3, scrutinised investments from countries like China. The desire for strong domestic champions and concern over Chinese investments in widely-used apps led to policies that produced a slowdown and withdrawal of Chinese VC interests in Indian applications and startups.

After 2020, Chinese VC activity came to a halt, with some large players like Ant Group reducing their stake in companies like Zomato and Paytm. Ant was the biggest Chinese fintech investor in India, and by 2025 it had exited Zomato (now Eternal), Bigbasket and Paytm completely. Similarly, Tencent sold stakes in PB Fintech and Dream11. It made no new investments after the political situation deteriorated. Although, China’s total investment in India comprised only around 5% of the USD 148 billion venture capital funding India attracted between 2014 and 2019, it dented key business ties and linkages.

Although some Chinese VC firms like Fosun have not exited Indian companies entirely, they have lowered their stakes in Indian startups and digital economy companies. Even Indian companies like MakeMyTrip and others have sought to raise capital from other sources to dilute the ownership share of Chinese companies, in response to public concerns about data security and Chinese influence. For instance, companies like Pratilipi saw investors like Shunwei Capital and Qiming Venture Partners sell their stakes and other non-Chinese investors replace them. The withdrawal of Chinese VC interest was primarily due to the geopolitical environment, which has only recently eased. It has raised hopes of the return of Chinese investments into Indian business.

Optimism of Return

Although Chinese venture capital firms played a big part in the growth of Indian startups and digital economy businesses, the geopolitical climate after the Galwan clashes necessitated a recalibration from both sides. Following the gradual improvement in bilateral relations since October 2024, both sides have expressed an interest in greater investments in India. The optimism about returning Chinese investments is balanced with caution and a more comprehensive, but fair, investment screening regulatory framework.

Business relationships and people-to-people ties would benefit from increased Chinese investments in Indian digital economy, provided they are not determined risks to national security or data security. Navigating the complex new environment may be a challenge for Chinese investors. Moreover, with India’s startup ecosystem and digital economy companies more mature than before, Chinese investors would also find a more competitive landscape. Nonetheless, with proper bilateral arrangements and adequate security screenings, investments have the potential to support people-to-people ties and mutually-beneficial economic linkages between India and China.