India’s strategic digital pushback against Chinese investments and apps has encouraged like-minded countries like the US, and some in Europe, to follow suit. Now it’s time to lasso the biggest Chinese domination tool – 5G, the umbrella under which apps, investments and soon governments could operate.
This new technology from China should not be looked at in isolation, as simply the purchase of telecom technology equipment, and part of India-China trade. It should be viewed in conjunction with China’s four heavens: BRI, the ambitious Digital Silk Route plan, Made in China 2025 and Chinese Standards 2035. Using its formidable AI base, 5G is the mother lode that enables the efficient gathering of global data from around the world, which will give cost efficiency to products listed in China 2025 and help China set global standards.
What’s now perceived by global manufacturers as standards “in China for China” will eventually be “by China for the world”. Visualise a four-tier cake – the bottom tier is BRI, the top tier is Chinese Standards 2035 and in between are the Digital Silk Route and Made in China 2025. 5G is the enabler for all, the infrastructural trunk or cake stand on which the cake sits.
Each global 5G network sale from China is one additional leg added to the cake stand, supporting and strengthening the multi-tier cake. Without strong legs supporting the cake stand, the four-tier cake will fall to the floor. The repercussions will be twofold: Externally for China’s global economic dominance and loss of bargaining power, while internally it could lead to internal strife and discontent, degrading the social contract of “the better life” for ordinary Chinese.
For a strategic, societal and demographic wave of change is under way in China. The country’s robust economic growth has meant rising wages and loss of the title China has held for so long, “the factory of the world”, over which the sun has begun to set. Deglobalisation – Covid-19 is the unexpected eclipse during the sunset – has seen China’s growth sink to an estimated 1% in 2020, the lowest in decades.
In return for continued authoritarian rule, the Chinese public wants better standards of living. This social contract is currently intact, but threatened. Premier Li Keqiang said at a press briefing last month, “There are 600 million impoverished Chinese who live on a monthly income of $161 and they need to be lifted out of poverty.” Higher wages plus an ageing demographic are putting a strain on China’s healthcare systems and budget.
The strongest leg of the cake-stand which holds the four-tier cake has already been weakened with the US and Japan looking at non-Chinese network equipment suppliers for 5G. European countries like the UK have announced they are relooking at the 5G contracts with Chinese equipment vendors given security vulnerabilities. Vietnam has developed its own version of 5G. The General Court, the second highest court in the EU, overturned the EC’s 2016 decision to block the takeover of O2 by a competitor, paving the way for consolidation of industries across the Union.
In the US, the China-US trade war and now a potential Chinese 5G boycott may change the fortune of debt-laden US telecom companies, which may get spectrum reserved for the defence sector to become competitive and avoid Chinese 5G installations.
In this scenario, China will do everything in its capacity to bring India to the table for 5G negotiations – via direct and indirect border skirmishes, drone attacks on oil installations on the west coast of India, cyberattacks, non-tariff barriers, misuse of Chinese social media apps, cutting off supplies of API. China will aggressively sue all Indian telecoms for reneging on contracts for current 4G upgradation and future 5G contracts if any, assuming jurisdiction clauses in these contracts are outside in a neutral country. A bailout package to pay the hefty fines, if imposed on Indian telecoms for reneging on contracts, will have to be funded by the government.
An already beleaguered Indian telecom sector will have to brace for more economic pain as equipment from non-Chinese companies is more expensive. But it can be incentivised by subsidies and tax breaks for patent development in India, enabling it to move from the current hardware-dependent networks to ones that will be software-centric with negligible dependency on the underlying hardware.
Imports from EU 5G equipment manufacturers will be the only option left on the table. The silver lining here is the long pending India-EU FTA will get oxygenated. It’s important for India to play an active role in the formation of the proposed D10 club by the UK administration, which consists of the G7 nations alongside South Korea and Australia. The D10 club is being created for channelling investments into existing telecom companies within the 10 member states, and creating alternative suppliers of 5G equipment and other technologies to avoid relying on China.
Could India eventually contribute to the birth cry of democracy and rule of law in China? What the WTO couldn’t achieve, the potential boycott of Chinese 5G equipment from a majority of G20 countries could well accomplish, if the deprived 600 million of China take to the streets. In that case, it’s Advantage India.
~ Blaise Fernandes
The writer is Director, Gateway House