Huawei at the centre of a global technology war

John Pomfret

PUBLISHED FEB 9, 2019, 5:00 AM SGT The Straits Times

The world could split into spheres of influence in the fight over 5G supremacy between the United States and China

Over the past few months, the US government has launched an assault against Chinese telecommunications giant Huawei for three publicly acknowledged reasons: Huawei, as the Justice Department alleges, was involved in sanctions-busting with Iran. The company also allegedly stole US technology and even awarded its employees bonuses to do so.

And third, because Huawei is a Chinese company and Chinese law mandates that it follow the orders of its security services, anything Huawei installs in equipment used by a US ally could pose a security risk to the United States.

But, in the three-dimensional chess game that is US-China relations, underlying this battle is another conflict with China over technology and US concerns that it is losing the fight.

This battle centres on the roll-out of 5G telecommunications technology that is expected to reshape not only modern economies but modern warfare, too. And so far, China appears to be ahead - very far ahead.

This matters because 5G will produce enormously faster broadband speeds - upwards of 10 gigabits per second - with no lags. This web of connectivity could facilitate the introduction of highways with driverless cars, advanced automation on factory floors and a brave new world where machines effortlessly exchange oceans of data.

It could also transform warfare with integrated military operations that would make today's joint operations look like children playing in a kindergarten sandbox. Imagine squadrons of pilotless fighters, drones and smart missiles along with a coordinated cyber attack.

Tragically for the US, China's efforts to roll out its 5G network have lacked any of the catalysing drama associated with the Soviet Union's launch of Sputnik, the world's first satellite, in 1957.

A report last year by Deloitte says China has, since 2015, outspent the US by an estimated US$24 billion (S$32 billion) in wireless communications infrastructure.

Density is key to 5G. A successful network needs more cell towers than 4G, meaning more small cells on telephone poles and street lamps. According to the Deloitte report, China Tower, the world's leader in building these relay stations, has invested US$17.7 billion since 2015, beating all its US rivals combined.

Nationwide, China has 1.9 million wireless sites against 200,000 in the US. For every 10 sq miles or 26 sq km, China has 5.3 sites, while the US has a paltry 0.4. Chinese telecoms firms are on track to begin standalone 5G service in 2020, five years ahead of their US counterparts.

Faced with this disparity, the Deloitte report warns that "China and other countries may be creating a 5G tsunami, making it near impossible to catch up".

To get ahead, China has leveraged its systemic differences with the US. A few decades ago, American analysts scoffed at China's continued use of communist-era "Five-Year Plans" to manage its economy. Not anymore.

According to Deloitte, China's most recent plan earmarks US$400 billion for 5G-related investments, dwarfing anything similar in the US. China's government has forced its three big telecommunications providers to work together to build 5G, something the US government could not do.

China also has strong-armed the country's leading Internet platform companies - such as Baidu, Alibaba, Tencent, JD.com and ride-sharing company Didi Chuxing - into taking a nearly US$12 billion stake in one telecoms provider, China Unicom, to subsidise its 5G roll-out.

Beijing has harnessed the full weight of its national government to ensure that Chinese firms are at the forefront of standards-setting negotiations worldwide. In a report released in November, the Eurasia Group consulting firm estimated that while China was on the sidelines of the standards setting for 3G and 4G, Chinese firms could end up holding upwards of 40 per cent of the standard essential patents for standalone 5G.

China is not the only country ahead of the US in 5G. Japan has far more sites per 26 sq km - 15.2 - than both China or the US. Germany has made similar progress to China's - with nearly 10 times more sites per 26 sq km than in the US.

But, despite some of President Donald Trump's claims, neither Japan nor Germany is considered a threat to the US. At root, the issue here is trust.

US moves against Huawei are driven by a fear that the Chinese Communist Party not only rejects the values of a Western liberal economic system but also is at war with those values across the globe. What's more, US officials worry that the Communist Party has conscripted Huawei in this battle, both as a weapon to dominate cutting-edge technology and as an agent that can conduct espionage on the West.

Despite Huawei's protestations that American worries about espionage are unwarranted, its executives routinely cross the line between state and private actors. Take Meng Wanzhou, Huawei's chief financial officer, who was detained in Vancouver in December and has now been charged with bank fraud in connection with Huawei's alleged sanctions-busting in Iran. She reportedly had eight passports, one a Chinese government official passport.

Wang Weijing, the Chinese employee arrested last month in Poland on espionage charges, worked for the Chinese consulate in Gdansk before joining Huawei, again blurring the distinction between Chinese officialdom and the private sector.

Seen in this light, the American actions against Huawei mix both an independent law enforcement action and a high-stakes worldwide contest with a government whose core ideology is increasingly inimical to US values.

So, what's next? Just a few years ago, pundits heralded the victory of globalisation and the onset of a borderless world. Now, the Huawei case raises the prospect of a newly bifurcated globe, split into technological spheres of influence. The US and its closest allies - Canada, Australia, New Zealand, Britain and Japan - are coalescing into one. China leads another. In the developed world, Germany and France are sitting on the fence. In the global south, Malaysia and Indonesia are up for grabs. And Huawei is at the centre.

WASHINGTON POST

 • John Pomfret, a former Washington Post bureau chief in Beijing, is the author of The Beautiful Country And The Middle Kingdom: America And China, 1776 To The Present.

The Straits Times says

Canada is facing the fallout from its move to arrest Meng Wanzhou, chief financial officer of Chinese telecoms giant Huawei, last December at the request of its neighbour, the United States. It is now bearing the brunt of China's wrath, as the proverbial grass that gets trampled on when elephants fight - in geopolitical context, the small and medium-sized states that get hurt when major powers jostle. How Ottawa deals with this could be salutary for countries in the East Asian region as rivalry between China and the US intensifies and they get drawn into it. Days after Meng's arrest in Vancouver, two Canadians, a former diplomat and a businessman, were detained in China. Last month, a Canadian convicted of drug smuggling had his 15-year jail term changed to a death sentence after a one-day retrial. These cases have been seen as retaliation for Meng's arrest.

But the Chinese have not stopped there. They appear to be also using their economic muscle as leverage to get the Canadians to release Meng to them. Canola shipments from Canada to China have been taking longer to clear Chinese customs, and permits needed to import genetically modified crops, including canola, have been more difficult to obtain, according to news reports. Canada has also been taken off a list of approved travel destinations for Chinese tourists, reports said, a likely blow to the Canadian tourism industry, which sees more than 600,000 Chinese travellers annually. And negotiations for a free trade deal - for the Canadians a way of diversifying trade away from the US, its biggest trade partner - have stalled. While the quarrel is between China and the US - Washington is seeking Meng's extradition to face charges of fraud related to sanctions against Iran and technological theft - Beijing has trained its guns on Canada. As former Canadian diplomat to China David Mulroney told the BBC, Canada made for a handy scapegoat for China to "kick and whack" for the arrest while it works out a resolution to the trade dispute.

In the face of Chinese pressure, Canada has stood firm on its position that the extradition process is an independent, legal one that needs to run its course. To the Americans, as US President Donald Trump has raised the possibility of linking the Huawei case to trade negotiations with the Chinese, Ottawa has made clear that any foreign country requesting extradition should make sure the process is not politicised. It has also pushed back against Chinese strongarm tactics by garnering the support of allies, including several European countries, Australia and New Zealand. How the whole saga will play out will be closely watched by countries around the world. Canada's refusal to be cowed, its effort to strike a balance between two major powers and its seeking strength in numbers are laudable responses that others will have to ponder too.