CHINAMacroReporter

'Dominating the Digital Silk Road'

‘China’s Belt and Road Portal reports the Digital Silk Road has enabled six thousand Chinese internet companies and more than ten thousand Chinese technology products to enter foreign markets.’
by

Task Force Report on China’s Belt & Road

|

Council on Foreign Relations

March 31, 2021
'Dominating the Digital Silk Road'
BIG IDEA | ‘BRI enables Chinese technology companies to penetrate and dominate markets.’
‘China’s Belt and Road Portal reports the Digital Silk Road has enabled six thousand Chinese internet companies and more than ten thousand Chinese technology products to enter foreign markets.’

‘Announced in 2015, the Digital Silk Road is a more focused undertaking than BRI writ large.’

  • ‘A handful of China’s national champions—Huawei, ZTE, China Mobile, China Telecom, Alibaba, Tencent, Baidu, and JD, as well as a few others—are encouraged to build out digital infrastructure in BRI countries, with less overlap and a clearer division of labor.’

‘Tencent, Baidu, and JD, as well as a few others—are encouraged to build out digital infrastructure in BRI countries, with less overlap and a clearer division of labor.’

  • ‘China’s Ministry of Industry and Information Technology has provided clear direction to these companies, identifying six core areas for the Digital Silk Road: 5G technology, smart cities, utilization of the Beidou satellite system, communication infrastructure, network connectivity, and telecommunications services.’

‘Under the Digital Silk Road, indigenous Chinese ICT firms receive state backing that gives them three sets of advantages:’

  1. ‘First, companies such as Huawei, Hikvision, and ZTE gain preferential government treatment through policy support and major lines of credit through CDB, China EXIM, and state-owned commercial banks. This in turn allows them to sell their products 30 to 40 percent more cheaply than non-Chinese competitors.’
  2. ‘Second, Beijing also extends credit to specific Digital Silk Road projects and countries to allow them to make major purchases from Chinese companies. For example, China EXIM financed 85 percent of the China-Pakistan Fiber-Optic Project and loaned to Nigeria the full cost of a Huawei-built 5G network.’
  3. ‘Third, policy backing and pricing advantages allow Chinese companies to receive preferential terms when they negotiate deals with local governments.’

‘China’s Belt and Road Portal reports Digital Silk Road has enabled six thousand Chinese internet companies and more than ten thousand Chinese technology products to enter foreign markets.’

‘For a technology company such as Huawei, moving into a new market can be expensive—a problem alleviated by government subsidies that make Huawei’s products significantly cheaper than its competitors and Chinese financing to Huawei’s customers that enables them to purchase these already cheaper products at lower interest rates with more generous grace periods.’

  • ‘Once Huawei is in place, it is relatively cheaper for additional Chinese companies to follow it into that market or for Huawei to gain a foothold in adjacent markets.’

‘China often offers BRI countries complete technology packages, including cloud services, mobile payments, smart cities, and social media applications from a combination of Chinese companies.’

  • ‘Once these technology suites are embedded, switching to non-Chinese providers becomes far less likely and more costly for local operators, especially because telecommunications companies generally cannot mix and match components—using Huawei equipment alongside Ericsson or Nokia, for example.’

‘Moreover, if Huawei builds the entire 5G network for a given Digital Silk Road country and its neighbors, this raises the chances that it will be chosen to upgrade those systems when newer technologies become available.’

  • ‘Huawei has already finalized more 5G contracts than any other telecom company, half of which are for 5G networks in Europe (see figure 11. above).’
  • ‘In Africa, Huawei has built 70 percent of the fourth-generation (4G) networks on the continent and has signed the only formal agreement on 5G on the continent.’
  • ‘In all, Huawei has shipped seventy thousand 5G base stations globally.'

‘The export of Huawei telecom equipment along the Digital Silk Road has also enabled the company’s share of global telecom equipment to increase by 40 percent in the years since BRI was rolled out.’

‘The Digital Silk Road provides additional backing to Chinese companies to build foreign digital ecosystems.’

  • ‘Alibaba, the Chinese e-commerce giant, has come to dominate e-commerce in Malaysia, for example, and its affiliate Ant Financial has subsequently established cooperation agreements with Malaysian banks, leading to much stronger bilateral commercial and financial ties.’
  • ‘Malaysia is an outlier in the extent of its embrace of Chinese e-commerce, but the Chinese government has also begun a push to export data centers, including through ASEAN, which could make members depend more on China for data storage, analysis, and exploitation.’

‘Through the Digital Silk Road, China uses the initial sales of digital infrastructure to set accompanying standards.’

  • ‘The success of Chinese companies such as Huawei and ZTE in building 5G networks and setting standards for these networks in Africa and parts of Asia is making it difficult for Western companies to sell similar technologies in these regions.’
  • ‘The concern for non-Chinese firms is China’s ability to use initial sales, along with service and maintenance contracts—and any accompanying standards—to lock in market share for Chinese companies, particularly in those sectors where switching to a different provider is difficult and expensive.’

More

CHINAMacroReporter

April 17, 2022
Is China's Tech 'Crackdown' Really Over?
Today, I’m sharing with you a bit of Ms. Schaefer’s analysis of the tech ‘crackdown’ (but not of the AI and algorithm law). She explains why...
keep reading
April 17, 2022
China: 'Sleep Walking into Sanctions?'
A looming risk is Russia-like sanctions on China. The sanctions on Russia are causing plenty of disruptions. But those disruptions would be nothing compared to the catastrophe of Russia-like sanctions on China. The good news is that if China does violate the sanctions, the violations would likely be narrow and specific - even unintentional. So secondary sanctions - if they come at all - likely won't hit China’s economy and financial system deeply – or (fingers crossed) U.S.-China relations.
keep reading
April 5, 2022
Russian Sanctions' Impact on China
In the meantime, some contend, China has a payment system, the Cross-Border Interbank Payment System or CIPS, that could make it independent of SWIFT.
keep reading
April 15, 2021
'TSMC faces pressure to choose a side in US-China tech war'
‘Taiwan Semiconductor Manufacturing Company (TSMC) has maintained its historic position of neutrality, reflected in the company’s strategy of “being everyone’s foundry”.’
keep reading
April 14, 2021
The Belt & Road in the Post-Pandemic World
In this issue of China Macro Commentary, I have focused just on the ‘Digital Silk Road’ and how it supports the business expansion of Chinese tech companies, and on BRI ‘connectivity’ projects: ports (China is involved in 93 around the world) and on the growing China-Europe freight trains traffic (This wasn't covered sufficiently in the Report, so I included a recent article from the Wall Street Journal), plus on the U.S.'s failure to meet the BRI challenge.
keep reading
April 13, 2021
'2021 Annual Threat Assessment of the U.S. Intelligence Community'
‘China increasingly is a near-peer competitor, challenging the United States in multiple arenas—especially economically, militarily, and technologically—and is pushing to change global norms.’
keep reading
April 13, 2021
In Battle With U.S. for Global Sway, China Showers Money on Europe’s Neglected Areas
‘The number of freight trains running between China and Europe topped 12,400 last year, 50% higher than in 2019 and seven times that of 2016, according to Chinese authorities.’
keep reading
April 11, 2021
'Why manufacturing matters to economic superpowers'
‘Whether such reshoring matters for national economies depends very much on the industry.’
keep reading
April 11, 2021
China in Jamie Dimon's Letter to Shareholders
‘China does not have a straight road to becoming the dominant economic power’.
keep reading
April 11, 2021
'Alibaba’s rivals on alert after China’s regulators hand out record fine'
“Everyone with a clear mind won't self-regulate, you just pretend that you do. Who will pay for the loss if you lost your competitive advantage because you self-regulated and others didn't?”
keep reading
April 10, 2021
Alibaba: 'Promote the healthy and sustainable development of the platform economy'
‘From the perspective of the long-term and healthy development of the platform economy, regulation by law and support for development are not contradictory, but are complementary and mutually reinforcing.'
keep reading
April 9, 2021
'The Best Explanation of Biden’s Economic Thinking I’ve Heard'
‘When President Biden’s thinking about the infrastructure investments necessary, a lot of it is in contraposition to what he is seeing China doing in terms of strategic investments.’
keep reading
April 8, 2021
Liu Ge: Competing with China a farfetched guise for US’ infrastructure plan
‘Historically speaking, it seems the only way for the US government to make costly public investments was to create an adversary that is presumed to threaten its security.’
keep reading
April 8, 2021
'Antony Blinken interview: The secretary of state offers a window into Biden's foreign policy decisions'
‘ “Our goal is not to contain China, hold China back, keep it down,” Blinken underlined.’
keep reading
April 8, 2021
'US adds Chinese supercomputing companies to export blacklist'
‘The Biden administration took its first trade action against China on Thursday, adding seven Chinese supercomputing developers to an export blacklist for assisting Chinese military efforts in a move that will likely further escalate frosty tensions between the world's two largest economies.’
keep reading
April 7, 2021
'Remarks by President Biden on the American Jobs Plan'
‘Look, do we think the rest of world is waiting around? Take a look. Do you think China is waiting around to invest in this digital infrastructure or in research and development?’
keep reading
April 7, 2021
China: 'Power Trader'
‘The theory of power trade better explains China’s economic and trade policies than does the theory of free trade or protectionism,’
keep reading
April 6, 2021
'Train Wreck: Ultimately companies have to choose.’
MUST READ: Bill Reinsch succinctly but brilliantly summarizes the situations in China and the U.S. and between the two.
keep reading
April 6, 2021
'Buy American!': Pushing U.S. Companies to Onshore Supply Chains
The debate about how to deal with China commercially ‘has moved in two directions: running faster—improving our innovation capabilities in critical technologies to better compete with China—and slowing China down by restricting its access to U.S. technology.’
keep reading
April 4, 2021
'Why Defending Taiwan is in the U.S. National Interest'
‘As long as Washington assesses that American security is best served by defending forward—an approach that has served the United States well over the past 70 years—Taiwan’s de facto independence will remain a key US interest and driver of American policy in Asia.’
keep reading
April 4, 2021
'Why China Is Going All "Wolf Warrior," All the Time'
‘All this is to say that, living in Beijing as I do, I think the current approach is predictable and consistent with everything else we are seeing in China in the New Era.’
keep reading
April 3, 2021
'With Swarms of Ships, Beijing Tightens Its Grip on South China Sea'
‘Not long ago, China asserted its claims on the South China Sea by building and fortifying artificial islands in waters also claimed by Vietnam, the Philippines and Malaysia.’
keep reading
April 2, 2021
'Genesis Celebrates Launch In China With Dazzling, World Record-breaking Drone Show Over Shanghai's Iconic Skyline'
'The spectacular visuals were coordinated to present the world of Genesis, delivering an audacious storytelling concept while also breaking the Guinness World Records for "The Most Unmanned Aerial Vehicles (UAVs) airborne simultaneously".’
keep reading
April 2, 2021
Mo' Infrastructure, Mo' Problems Copy
‘China’s reliance on building roads, railways and airports to support growth has caused a spike in debt, with some of that money funneled into unnecessary infrastructure and uneconomic boondoggle developments.’
keep reading
April 2, 2021
How Does the U.S. Compare to China?
Two reports from Bloomberg – ‘Biden Starts Infrastructure Bet With U.S. Far Behind China’ and ‘Biden’s Biggest-Ever Investment Plan for U.S. Still Trails China’ – highlight a few of the differences.
keep reading
April 2, 2021
USTR | '2021 National Trade Estimate Report on FOREIGN TRADE BARRIERS'
‘Made in China 2025 seeks to build up Chinese companies in the ten targeted, strategic sectors at the expense of, and to the detriment of, foreign industries and their technologies through a multi-step process over ten years.’
keep reading
April 2, 2021
‘2021 Report Card for America’s Infrastructure’
‘The 2021 Report Card for America’s Infrastructure reveals we’ve made some incremental progress toward restoring our nation’s infrastructure.’ ‘For the first time in 20 years, our infrastructure is out of the D range. America's Infrastructure Scores a C-.’
keep reading
April 2, 2021
'US to make it easier for diplomats to meet Taiwanese officials'
'Plan to loosen restrictions on contacts with Taipei threatens to provoke China.'
keep reading
April 2, 2021
Biden Starts Infrastructure Bet With U.S. Far Behind China
Even though he didn’t rely solely on the China challenge to justify his new American Jobs Plan; devoted to infrastructure and more, President Biden certainly he had China in his sights. Because as Jonathan Hillman, a senior fellow at the Center for Strategic and International Studies, wrote“The United States is entering what could be a decades-long competition in which economic and technological power will matter just as much, if not more, than military might.” “Starting this race with decaying infrastructure is like lining up for a marathon with a broken ankle.”
keep reading
April 2, 2021
President Biden Lays Out His ‘American Jobs’ Plan
‘It has become a cliché in U.S. policy circles that the best China policy is to invest in core U.S. capabilities: education, infrastructure, and research and development,’ writes Evan Medeiros of Georgetown University in ‘How to Craft a Durable China Strategy,’ in Foreign Affairs.
keep reading
April 2, 2021
'China’s Dangerous Double Game in North Korea'
‘Beijing’s North Korea policy is primarily motivated by a desire to counter U.S. power in the Asia-Pacific region and increase Chinese influence on the Korean Peninsula.
keep reading
April 2, 2021
'Japan’s Suga to Be the First Foreign Leader to Meet With Biden'
‘Japan walks a narrow line as it seeks to maintain close ties with its only military ally, the U.S., while avoiding damage to economic ties with its biggest trade partner, China.
keep reading
April 1, 2021
'Convicted in Hong Kong'
‘Everyone in the former British colony understands the message being sent from Hong Kong’s new masters in Beijing:’
keep reading
April 1, 2021
'U.S. dollar at risk as China races ahead on digital yuan'
‘So why should America care about any of this?’
keep reading
April 1, 2021
PRC Foreign Ministry Response to the USTR's 'National Trade Estimate Report'
‘The accusations and slanders made by the US against China's industrial policies are groundless.’
keep reading
March 31, 2021
'Consumer boycotts warn of trouble ahead for Western firms in China'
‘Western executives in China cannot shake an unsettling fear that this time is different.’‘Their lucrative Chinese operations are at rising risk of tumbling into the political chasm that has opened between the West and China.’
keep reading
March 31, 2021
'How the Pandemic is Changing the Belt & Road Initiative'
‘The building of roads, railways, ports, and power plants is giving way to a BRI centered on technology—primarily telecommunications, connectivity, health care, and financial services.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.