Unable to persuade India to sign on to its Belt and Road Initiative (BRI), China has entered the Indian market through venture investments in start-ups and penetrated the online ecosystem with its popular smartphones and their applications (apps). India may have sidestepped the physical corridor, but has unwittingly signed up for the virtual corridor. China quietly has created a significant place for itself in India in the last five years - in the technology domain, according to a research by Gateway House.

"The Belt and Road Initiative carries with it Chinese products and standards, both virtual and physical. India may have sidestepped the physical corridor, but has unwittingly signed up for the virtual corridor," the study notes.

Over the course of one year, Gateway House has conducted a deep study of Chinese investments in India as part of a larger research project on Chinese investments in India's neighbourhood. The findings are remarkable: 18 of the 30 Indian unicorns have a Chinese investor. This means that China is embedded in Indian society, the economy, and the technology ecosystem that influences it.

As per the study, Chinese tech investors have put an estimated $4 billion into Indian start-ups. Such is their success that over the five years ending March 2020, 18 of India's 30 unicorns are now Chinese-funded.

TikTok, the video app, has 200 million subscribers and has overtaken YouTube in India. Alibaba, Tencent and ByteDance rival the U.S. penetration of Facebook, Amazon and Google in India. Chinese smartphones like Oppo and Xiaomi lead the Indian market with an estimated 72 per cent share, leaving Samsung and Apple behind.

Giving the reasons for China's tech depth in India, the study notes that this is because there are no major Indian venture investors for Indian start-ups. China has taken early advantage of this gap.

Alibaba's 2015 investment in 40% of Paytm, a digital payments platform, paid off barely a year later when in November 2016, the government of India demonetised its large currency notes and simultaneously promoted a move to a cashless economy.

Paytm benefitted from Alibaba's superior fintech experience, which it applied to India seamlessly, making it a dominant player.

Also, China provides the patient capital needed to support the Indian start-ups, which like any other, are loss-making. The trade-off for market share is worthwhile.

For China, the huge Indian market has both retail and strategic value. Therefore, companies like Alibaba and Tencent have different considerations and horizons for their investments. In contrast, Western venture money is mostly through funds like Sequoia and SoftBank.

In India, China's tech giant companies and venture capital funds have become the primary vehicle for investments in the country - largely in tech start-ups. This is different from other emerging markets where Chinese investments are mostly in physical infrastructure. Chinese FDI into India is small at $6.2 billion, but its impact is already outsized, given the increasing penetration of tech in India China's Whereas investments in other emerging markets countries is mostly in physical infrastructure, Chinese funding to Indian tech start-ups is making an impact disproportionate to its value, given the deepening penetration of technology across sectors in India.

TikTok, owned by ByteDance, is already one of the most popular apps in India, overtaking YouTube; Xiaomi handsets are bigger than Samsung smartphones; Huawei routers are widely used. These are investments made by nearly two dozen Chinese tech companies and funds, led by giants like Alibaba, ByteDance and Tencent which have funded 92 Indian start-ups, including unicorns such as Paytm, Byju's, Oyo and Ola.

Unlike a port or a railway line, these are invisible assets in small sizes - rarely over $100 million - and made by the private sector, which doesn't cause immediate alarm. All this adds up to just 1.5 per cent of the total official Chinese (including Hong Kong) FDI into India. This doesn't cover investments made by funds based out of Singapore and elsewhere, where the ultimate owner is Chinese, so the actual investment in India will be higher.

China is most active in India in the start-up space. Gateway House has identified over 75 companies, with Chinese investors concentrated in e-commerce, fintech, media/social media, aggregation services and logistics. A majority - more than half - of India's 30 Indian unicorns (start-ups with valuation of over $1 billion) have a Chinese investor.