[SCMP Column] Huawei and technology hegemony

December 15, 2018

Huawei has over the past two weeks stirred a hornet’s nest of controversy that has stripped the veil away from Donald Trump’s tariff war and revealed a darker and more intractable theatre of trade war driven by US defence and intelligence Zealots and focused on anxieties that America’s unchallenged position as the world’s technology superpower is under grave threat.

The news website Axios appears to have been the first to get its hands on a striking report to the White House by unnamed National Security Council personnel early this year on China’s technology challenge. The threat converges around 5G, the technology leadership aspirations expressed in Xi Jinping’s Made in China 2025 vision. The role of Huawai is at its heart.

The report calls for nationalisation of the US’s 5G roll-out plans to protect US technology leadership, and to keep the US internet secure from China, “the dominant malicious actor in the Information Domain”: “We need to protect democratic allies against China… and inoculate developing countries against Chinese neo-colonial behaviour… By ensuring the network is built with security as a foundational principle, Americans can concentrate on living their lives without fear of walking dangerous digital streets.”

“Europe led 3G development, the US led 4G, and with these market-altering activities the Chinese may be poised to lead in 5G Huawei,” the report warned: “The advent of the Internet (has) changed the character of modern warfare...In the 21st Century freedom is won and lost in the information domain.”

“Huawei has used market-distorting pricing and preferential financing to dominate the global market for telecommunications infrastructure.”

To outsiders like me, despite being massively impressed by the progress made by Huawei in the roll-out of 5G worldwide, this breathlessly paranoid view of China’s technology challenge is hard to swallow. As Jamil Anderlini in the Financial Times noted this week, “China today is far less of a threat to American tech dominance than many in the US believe.” He bemusingly notes the China “remains predominantly a low-margin, low-end manufacturing and assembly base for global supply chains” – that even though , for example, it has 3,000 companies producing around 38bn ballpoint pens a year, it still struggles to produce a precision ball point pen tip (90 per cent are still imported from Japan, Germany and Switzerland).

Closer to Huawai and the internet challenge, Anderlini recalls that China still today imports 95 per cent of the high-end microchips used in the computers and smartphones that it makes – at an import cost of US$227bn in 2016. Huawei itself reveals that 33 of its 92 core suppliers are US companies – hardly a position from which to launch an existential challenge to the US as the world’s pre-eminent technology superpower.

But at the heart of this angst-ridden perspective on China’s technology challenge seems to be what the FT’s Martin Wolf calls the Manichaeism embedded in the world view of a deeply religious cluster of officials around the Trump White House.

I confess I knew next to nothing about Manichaeism without Martin Wolf’s reminder, so had to take a quick trip to Wikipedia: Manichaeism, a belief system developed by the Iranian prophet Mani some 1900 years ago, sees the world as a permanent struggle between the good spiritual world of light, and an evil material world of darkness. The responsibility of every good person is to seek out and destroy all sources of darkness and evil. In the minds of Trump’s modern-day Manicheans, the US of course lives in the world of light, while China, Chinese people, and Chinese companies, are part of this evil material world of darkness, and need to be kept in check, and if possible purged.

For these modern-day Manichaeans, Huawei is the very heart of darkness. And at the heart of this heart of darkness is Ren Zhengfei, the former PLA engineer who founded the company in 1987. The paranoid worldview depicts Ren as a military man with close government and military links, winning most of his company’s business on the back of cosy government telecoms contracts.

My own on-the-ground experience in China makes me suspicious and dismissive of this paranoid view. As Deng Xiaoping slashed the army from 6m to 2m in the early 1980s, literally millions of “soldiers” (Ren was an engineer) were given the boot, cast off to build a future in the civilian world. At the time, I was walked around literally dozens of former armaments factories across Sichuan, in particular around Chongqing, that were being converted to make dish-washers, air conditioners and other household products. When Ren launched Huawei he was among those cast-offs, moving to Shenzhen to trade telecoms equipment.

Of course in the telecoms sector he subsisted on lots of government procurement contracts, but in this I see Huawei as little different from Texas Instruments, GE, Raytheon or Lockheed in the US, or BAe or Babcock in the UK, or Dassault or Aerospatiale in France: smart, aggressive and lucky to sit in a massive and fast-growing market.

While the US and its “Five Eyes” alliance of western intelligence services have succeeded in persuading the Japanese, Australian and New Zealand governments to bar Huawei from their core 5G roll-out – and partly succeeded in the UK, Huawei has continued to win a role in 5G roll-out across most of the developing world – Huawei signed MOUs in 22 countries in November alone.
Huawei is of course leading the 5G roll-out in China itself, confident that the commercial launch of services will be in full swing in 2020 – fully five years ahead of the US, the EU, Japan, South Korea and Australia, according to the tech consultancy Eurasia Group. And it is this lead, which will enable early development of the “big data” services underpinning AI, autonomous vehicles and “smart city” developments, that fills US security wonks with such angst – and leading US tech companies too.

The danger is grave that this conflict may lead to a bifurcation of the world’s digital economy, with countries across the world being forced to choose between distinct and incompatible Chinese or US systems. It is an unnecessary and paranoid battle that can inflict great harm. We are not in a war between the forces of good and of evil, but between clever companies that are doing what clever companies do – fight fiercely for market share wherever they can.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own.

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