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Author : Tronserve | Tuesday, 8 October 2019

China Is Too Big To Be Isolated

Author : Tronserve | Tuesday, 8 October 2019

Just after it was reported in September that NTT Docomo, Japan's widest mobile carrier, would not offer phones from Huawei Technologies for use on its 5G network, the Chinese corporation announced its new products would ship without Google applications. These steps simply point to the coming of a technologically divided world. The U.S. in May blacklisted Huawei due to national security concerns, imposing restrictions on sales of U.S. technologies, including Google's Android operation system, to the Chinese company.

With the U.S. Commerce Department having placed Huawei on what it calls the Entity List, the company's new phones likely will not come with popular apps such as Gmail, Chrome and Google Maps. Considering this situation, there is a strong strategic rationale for DoCoMo's decision. The Australian government has decided to banish Huawei from supplying equipment for its 5G network. In New Zealand, the Government Communications Security Bureau has voiced national security concerns regarding allowing Huawei to supply key 5G technologies.

It appears an alliance is establishing among Asia-Pacific countries, mainly U.S. allies, to shut out Huawei's infiltration into 5G wireless architecture. But a strategy to technologically isolate China is unlikely to work.

Many African countries are receiving Huawei's entry into their telecom markets. Malaysian Prime Minister Mahathir Mohamad and Thai economy minister Pichet Durongkaveroj have said they are optimistic toward adopting Huawei equipment. Singapore has remained silent on this issue. Chinese 5G technologies are making steadfast inroads into several parts of the world, mostly nations joining President Xi Jinping's "One Belt, One Road" infrastructure building initiative, planned to connect countries across Asia, Africa and Europe.

The primary reason is simple: Huawei's 5G offerings are 15% to 30% cheaper than rival products provided by Nokia and Ericsson, according to the head of Huawei's Australian unit. The world is partitioning itself into two groups: nations that reject competitive technologies to avoid surmised national security risks and those that prioritize upgrading economic infrastructure at lower costs.

Pro- and anti-Huawei spheres are growing with large implications for the future of the global economy. With the U.S. and China revealing few signs of trying to meet halfway on the Huawei issue, other countries are coming under pressure to take sides.

Alarmed by the prospect of facing a U.S. trade embargo on a diverse range of parts and licenses, China has started stepping up its efforts to build a self-sufficient supply chain. HiSilicon, Huawei's semiconductor arm, has reportedly begun full-fledged operations to manufacture its Balong 5G chipsets, a market in which Micron Technology has been the dominant player. Huawei plans to produce as soon as next spring its first smartphones running on its own Harmony OS, which the company boasts outperforms Google's Android.

The U.S. strategy to lessen the amount of Chinese equipment in 5G networks is having an unintended consequence: It is driving the world's second largest economy to build their own technological ecosystem, one that could perhaps involve many other countries. A global supply chain that has evolved over many years cannot be easily reorganized. It may be true for now that Huawei cannot manufacture products without U.S. technologies or Japanese parts. But this should never be taken as proof that a strategy of containing China will work in the long run.

As of the end of April, somewhere around 130 countries had signed onto the Belt and Road. The total represents 5 billion consumers, or 60% of the global population. There is no ruling out the possibility that this group may gradually develop into a huge economic bloc four times larger than the Western World, including the U.S., Europe and Japan.

China is simply too big to be isolated.

To refrain from splitting the world into two bitterly divided blocs, the U.S. and its allies need to entice China to embrace the current world economic order, in which markets are ruled by law, not the party. The true aim of the Trans-Pacific Partnership multilateral trade pact that Trump pulled the U.S. out of in one of his first acts as president was to integrate China into international trade rules. It is perhaps time to start envisioning a TPP for digital trade involving the U.S. as well.


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