Post pandemic Europe will need to be part of ‘Digital Silk Road’ more than ever.
Since the outbreak in China of the virus that causes the Covid-19 respiratory disease, experts around the world have been looking into how the pandemic will end up impacting the country, and how it will reshape its influence on the global scene.
In particular, many have argued that the Belt & Road Initiative (BRI) will be negatively impacted because of the urgency of focusing energies and allocating resources into the domestic domain to move toward the recovery of the Chinese economy and society at large.
It is certainly reasonable to think that this crisis requires extreme measures that cannot be combined with conspicuous investments in other countries, which also face the same challenges. However, it has probably been underestimated how a specific segment of the BRI could instead open up some opportunities that the decision-makers in Beijing do not want to miss.
The Digital Silk Road (DSR), which is constituted of a broad set of projects in artificial intelligence, Internet of Things, 5G, fibre-optic cables and new technologies to construct a new digital economy could gradually be expanded even during turbulent times, if fifth generation networks are promoted and accelerated, as the Communist Party of China (CPC) wishes, equally at home and abroad.
In this framework, inevitably, private companies such as the national champion Huawei continue to play an active role to drive technological breakthroughs in spite of the adverse circumstances originated by the pandemic. This role reflects the aspirations of the Middle Kingdom within the technological minefield, which in turn depends on the success of its tech-driver companies to materialize.
The Shenzhen-based company, leveraging its leadership in China, where it recently won 56% of the total China Mobile’s 5G contracts, could boost its resilience in front of the 1.4% growth in revenues registered during the first quarter of the year in virtue of the virus emergency, and could also proceed with the plan to access advanced economies in Europe further.
In January the UK, with some restrictions, agreed to allow Huawei to be included in the development of fifth-generation periphery networks to support the digital transformation of the country’s industrial apparatus. This clearly is a top priority to reinforce the weight of the country in the international arena after Brexit.
The decision has been attacked by critics but will be not revisited in spite of the contextual changes. The company’s relationship with London, in particular, appears still to be promising considering the appointment of Micheal Rake to the board of directors of Huawei UK.
Rake, who previously was chairman of the British Network Operator BT and adviser to then Prime Minister David Cameron, is an important figure promoting the reliability of the Chinese company in the West.
But the United Kingdom is only one component of a mosaic that Huawei wants to complete in its commitment to 5G in Europe, where countries have taken divergent positions on the adoption of Chinese technologies.
Even though Huawei claims to have contributed €2.5 billion (US$2.7 billion) to Europe’s gross domestic product in 2018, showing the relevance it has in the market, concerns related to national security persist in relation to the company’s links with the government of China, and the high level of dependence on the Asian giant’s technologies in many BRI countries that expose them to risky situations.
Specifically, in January last year, the European Union announced strict guidelines for 5G communication infrastructures in order to contain high-risk vendors, and even if Huawei was not expressly mentioned in the document, the reference seemed obvious in the light of US statements against allowing the company into the 5G networks of its allies, and President Donald Trump’s administration intensified pushback against the company founded by Ren Zhengfei.
Nevertheless, the final decision was left to the member states of the EU.
France hasn’t started to roll out its 5G network, but Huawei is carrying on with its plans with an investment of €200,000 to build a new wireless communication manufacturing facility in the country, specialized in 4G and 5G equipment. But while smaller operators such as Bouygues Telecom and Altice rely on Huawei, big French players such as Orange prefer to partner with Nokia and Ericsson.
In contrast, Telefonica and Vodafone in Spain took steps to cooperate with Huawei in the 5G area, further demonstrating the growing Chinese influence in that country. Germany, instead, aims to adopt an approach that could be supported by its various political entities. A paper issued by the Christian Democratic Union to evaluate trustworthy suppliers and excluding interferences from foreign actors is, in fact, a signal that a decision is pending.
However, the dramatic juncture we are witnesses of highlights how the disruption faced by Huawei is temporary, because digital infrastructures and technologies will be much more critical to all of us in the near term, as tomorrow’s world will be powered by a great need of data flows and fast networks.
Governments will be required to act accordingly to bring connectivity to their markets through strategic partnerships. Many state actors could initially resist the idea of cooperating with Chinese telecom-equipment makers to build 5G networks, but the different ecosystem that will emerge after the pandemic will make hesitation a luxury that cannot be afforded if people, businesses and cities do not want to be left behind in a fast-changing environment.
In Europe, the gains stemming from 5G-enabled realities will soon overcome the barriers posed by political boundaries and doubts around the relation between Huawei and the CPC. To achieve technological sovereignty and to maintain their global competitiveness, European countries will have to take a more definite position on Huawei, unless they are able to find and develop feasible alternative solutions – which are hard to study in acceptable short terms.
In this context, while the time variable becomes much more important in virtue of the negative impact generated by the virus emergency, Huawei could be essential, even at the cost of putting under stress a country’s ties with Washington. Automatically, the features of the post-pandemic markets will make Chinese tech companies stronger and will open new gateways to Huawei 5G in Europe.
If so, the Digital Silk Road will benefit from a heightened reputation of the Chinese players in the West, consequently leading China to gain terrain in its competition with the US.
At the moment, the tension between Beijing and Washington is evident, with the latter spreading accusations that China lacked transparency around the virus’ origins, and continuing its move on the tech domain, with the US Department of Commerce proposing rules to restrict exports of semiconductors and other technologies to China earlier.
But even taking into account the initiative launched by the United States in 2018 related to the Digital Connectivity and Cybersecurity Partnership (DCCP) in the Indo-Pacific region, the American actions in Europe will remain insufficient to make the Chinese technological offer unattractive in front of the broken shards that the Covid-19 pandemic will leave behind.