China is still an important market, says Peak XV, formerly Sequoia India

China will remain an important market for investors in the long term, even if other countries now benefit from investment flowing out of China amid escalating tensions with the US, according to Peak XV Partners, formerly Sequoia Capital India and Southeast Asia.

“The China Plus One strategy, in terms of sourcing and so on, definitely benefits places like India, Southeast Asia,” said Shailendra Singh, managing director of Peak XV Partners, one of the largest venture capital firms in Asia with $9 billion in assets under management.

“In the very long term, if you take a 10, 20, 30-year view, if you assume that geopolitics will find some new normal, China will be a huge economy and good businesses will be built in China,” Singh told Tanveer Gill of CNBC.

Last year, Sequoia split into three independent geographic units – Sequoia Capital in the US and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China. The move came amid increasingly strained relations between Washington and Beijing.

Peak XV has invested in over 400 companies in the technology, software, financial services and consumer space. These include fintech firm Pine Labs, Singapore-based online retailer Carousell, Indonesian ride-hailing giant Gojack as well as Indian edtech Byju’s and Unacademy.

For years, China has been the technology and innovation hub of Asia, home to tech giants including Alibaba Group and Tencent. It also earned the title of the world’s factory producing low-cost consumer goods, as well as most iPhones and electric vehicles in the world.

However, companies such as An apple and BMW are diversifying their supply chains away from China amid geopolitical concerns. Apple now reportedly makes about 1 in 7, or 14%, of its iPhones in India after China’s strict Covid control measures disrupted its operations there.

While India and Southeast Asian countries benefit from such diversification efforts as companies set up operations elsewhere, China will still be an important market, Singh said.

“All of us around the world, even though India or Southeast Asia may benefit in the short term, we need to really think about how we would work well with China in the long term,” Singh said.

David Roche, president and global strategist at Independent Strategy, said in March that India will not replace China in global trade because the Chinese model is “based on achieving global market share” while the Indian model is “about domestic market development “.

“India will continue to make progress, but it will be slow and steady progress and not at all like the Chinese model,” Roche said.