February 10, 2023

China’s Digital Silk Road Strategy integrates technology, economics, and politics with the long-term goal of altering the post-World War II US- European world order.

An assessment of China’s three wars strategy by the U.S. Department of Defense found that the CCP’s goals were to reclaim global status over the United States by weakening our alliances and defeating the US through non kinetic deceptive warfare.   The telecommunications company Huawei is one (of many) examples of how they are doing it and how they are succeeding.

Until a few years ago Huawei was a little-known vendor of phone switches. Today it is the world’s largest telecommunications equipment company and the acknowledged world leader in the critical 5-G telecom equipment market.

This dramatic transformation is the result of China funneling tens of billions of dollars in financial assistance to Huawei. Huawei was given access to $75 billion in state support. It also   received massive financial assistance from Chinese banks in the form of loans and credits amounting to $16 billion. Huawei received other forms of financial support with salaries, tax benefits, property tax abatements, and subsidized raw materials. These extra benefits netted Huawei the equivalent of another $25 billion in revenue.

In addition to these direct and indirect supports for Huawei, the Wall Street Journal reported that China Development Bank and Export-Import Bank of China made more than $30 billion in credit lines available to Huawei’s customers.  According to the Journal’s analysis, Huawei’s subsidies were 17 times larger than the subsidies of Nokia of Finland, which is the world’s second largest telecommunications equipment maker and Sweden’s Ericsson, the third largest, posted none for that period.

The massive direct and indirect subsidies the CCP steered toward Huawei have enabled it to literally make offers too good to refuse to governments in Asia, Africa, Europe and Latin America – and even in rural portions of the US. By helping Huawei succeed in winning the contracts to provide telecommunications services in these counties China has gained a vital and reliable strategic foothold in regions of geo-political importance to the US.  In addition, to the obviously intimate relationship between the company Chinese law requires the company to collaborate with the Chinese government on information that transverses these networks. This information can be used by the CCP generating even graver security concerns.

Huawei is just one example of the breadth and depth of China’s sophisticated, and very well-funded, digital strategy. In the particular case Huawei was placed on the US Department of Commerce’s “Entity List,” to impose restrictions on its engagement within US commerce. Huawei was placed on the list after numerous offenses indicted by the US Department of Justice. Violations of the International Emergency Powers Act were committed by Huawei Technologies by illegally assisting Iran with evading sanction

Notwithstanding Huawei’s problematic standing under US law, it has been extremely successful in winning major international contracts. Naturally Huawei is most persuasive in cash-strapped states where telecommunications infrastructure is considered critical to badly needed economic development. By providing investments that are seemingly condition less, Chinese aid and investments are attracting many states that are unable or unwilling to meet the demands of Western benefactors. In many instances Huawei’s favorable terms have persuaded many nations to overlook security issues as not being sufficient enough to pass on such a great deal.

Developing countries often prioritize cost over the related security risks with Chinese equipment. For example, in 2018 the African Union had an incident in which their Huawei supplied telecommunications servers were compromised, according to Western media. This caused five years of AU information to be leaked back to the Chinese government. This serious security breach did not deter the African Union from continuing to renew their agreement with Huawei Technologies.

In Pakistan Huawei pitched a surveillance system which then won approval of the prime minister. Pakistan’s procurement regulations required effective bidding to take place. However, The Export-Import Bank of China offered to lend Pakistan the needed $124.7 million dollars and waive their 3 percent interest fee on a twenty-year loan which was enough to seal the deal for Huawei.

A 2023 New York Times article described how China’s COVID-19 vaccine diplomacy was leveraged in Brazil allowing them to re-engage Huawei’s 5G deal after being initially eliminated from the competition. With deaths related to COVID-19 rising to their highest levels and a dangerous new variant stalking Brazil, the communications minister of Brazil went to Beijing in February of 2021, met with Huawei executives at their headquarters and requested Huawei’s assistance in facilitating Brazil getting access to Chinese COVID vaccines. Brazil received the vaccines and Huawei’s was allowed to participate again in the 5G auction eventually winning it.

Huawei has even been successful in convincing a number of rural telecom providers in the US to adopt Huawei systems. Fortunately, the US government has recognized the security threat of Huawei providing service in the US implemented a “rip-and-replace” program so the rural carriers would be able to provide 5G services using alternative equipment providers. Unfortunately, as of this writing the US Rip-and-Replace program is suffering from a $3 billion dollar shortfall which puts the program in a state of uncertainty if not jeopardy.

The US also advocated Rip-and- Replace as a policy for its allies. Under the Trump Administration US Secretary of State Mike Pompeo announced a series of agreements with the US and Eastern European countries called for the “rip and replace” of Huawei technology from their networks. Although there is sympathy for the approach, in some major cases Rip-and Replace may simply be impractical. The United Kingdom is arguably the most reliable ally of the United States and Vodafone, the world’s second largest telecommunications system, is based there. In an April 2020 essay, Vodafone executive Joachim Reiter argued against the US position that Huawei products need to be eliminated from Western networks that are part of the international security supply chain for security purposes. Reiter pointed out the Ripping Huawei 5G technology out of their international networks would make little difference as Huawei also provided Vodafone’s 3 G and 4 G systems.

Although Huawei has received substantial attention for its operations in the West’s telecommunications markets, it is far from the only, or the largest Chinese IT/Comm company that is intently involved in China’s Digital Silk Road initiative. Future posts will address some of these additional examples which will highlight the need for the US to create a much more fulsome, sophisticated and integrated cyber strategy embracing western and free market principles and values.

Abstracted from Fixing American Cybersecurity: Creating a Strategic Public Private Partnership. Larry Clinton editor Georgetown University Press 2023 – available on Amazon.