Chris Poray / Sep 2021
The Digital Silk Road (DSR) was established by China as the technical arm of the Belt & Road Initiative (BRI) in 2015. Key investment areas for the DSR are hard infrastructure, digital economic platforms, financial technology and security-related services and platforms.
In contrast to the majority of the BRI, the DSR has a mix of both public and private sector engagement and funding. State-owned enterprise projects receive public funding, meaning projects led by private organisations, such as the ZTE roll-out of ICT-infrastructure, are largely missing out on the huge levels of state-funding. A clear line between private and state is prevalent throughout the West but in China decades of mergers between private and public enterprise have blurred the line as Beijing has increasingly looked to the private sector for emerging technological advances for public causes. The concept of zhengjing jiehe (combining politics and economics) and yijing cuzheng (using economics to promote politics) means that when analysing the 5G opportunities that Huawei offers and the wider BRI initiative we must understand that dealing with China or Chinese organisations can present serious political and security issues.
With the BRI rolling vast swathes of telecommunication lines across the globe and many countries adopting the Chinese model of restricted internet and technological governance, the Chinese type of restricted governance not only causes political polarisation and restrictions on freedom of speech. The new 5G will “change society” according to Senior Product Manager of Huawei, Steven Wu. This opportunity to shape the future of the digital economy has resulted in competition between China and the West on the same level as the space race.
The European Union’s new “Global Gateway” launched by European Commission President Ursula von der Leyen suggests that European competitiveness has been threatened enough to warrant a response from Brussels. This scheme, which was announced on 15 September at the State of the Union Address, directly targets growing Chinese economic and strategic influence, which has, in part through the BRI, infiltrated European economies. President von der Leyen stated that the goal of the Gateway was “to create links and not dependencies”, in turn increasing European competitiveness and self-reliance and echoing the ambitions laid out in the “Chips Act”, European Parliament 2021. The reliable supply chains that Brussels is looking to establish are an effort to lessen the influence of Chinese suppliers although “the global 5G equipment supply chain being complex, interlinkages with Chinese suppliers are inescapable”, according to James Lewis of the Center for Strategic and International Studies.
The growth of these Chinese supply chains is arguably an outcome of Chinese domestic policy rather than technological dominance, with preferential treatment leading to a control of 75% in the domestic Chinese market and resulting in Huawei having an effective monopoly. There are claims by Huawei and Beijing that restrictions upon their 5G involvement in national infrastructure are motivated by protectionist and political ideologies; however, those countries that have restricted their involvement, such as Australia, New Zealand, Czech Republic, the US and others, are yet to have domestic companies that produce such technology. This illustrates that national security concerns are coming before economic gains.
5G, or the “fourth industrial revolution”, will have a significant impact on the global political economy, and as a result it will be pivotal for nations to conduct robust risk analyses when accepting or declining 5G infrastructure deals involving Huawei, the DSR or the Chinese government. Handing over large swathes of critical infrastructure as part of the BRI or even as bi-lateral deals will need close vetting, and the cheaper initial costs that Huawei presents have the potential to cause significant economic trouble in the future.
How effective the implementation of the emerging technology is will ultimately depend upon to the individual nation’s economic policy and their balance of security versus economic benefit. Through such BRI infrastructure projects, security and trade are becoming increasingly intertwined. To maximise trade growth and facilitation, the barriers presented by security concerns, whilst being understandable, will negate the potential benefits brought about by 5G, both for developing and developed economies. But if the Chinese are willing to withdraw their veil of uncertainty and opaque trade deals, Europe’s Gateway could work in tandem with them. Observing historical and current trends, an economic duality seems more likely than a partnership.