In Europe, whether to exclude Huawei or ZTE from China in 5G construction has been under discussion and controversy, the UK has already issued a ban, and Germany has not made a clear position on "banning" or "continuing to use".
Recently, a number of German media reported that the German government plans to ban German mobile network providers from using certain components from Huawei and ZTE in 5G networks. For several months, Germany's Federal Agency for Information Technology Security and the Federal Ministry of the Interior have been examining whether there are components in Germany's 5G networks that threaten national security.
Two rhetoric by the German security service is that vendors may technically presuppose backdoors for foreign intelligence to steal data; Because dependence on foreign technology may lead to foreign countries exerting political pressure on Germany, i.e. two possibilities. Therefore, the review of the Federal Information Technology Security Service and the Federal Ministry of the Interior is not a purely technical review, but an assessment of political factors: how much Germany depends on China on 5G, and how likely it is that the latter will rely on pressure on the former.
Concerned about over-reliance on foreign products on critical infrastructure, Germany amended its law so that from September 2021 the installation of technical components of critical infrastructure must be approved by the Federal Agency for Information Technology Security and the Federal Ministry of the Interior, which may be vetoed by both government departments on grounds that threaten public order or national security.
According to the report, although the legal text does not mention Huawei, Huawei is the reason for Germany's legal change. Analysis by telecom consultancy Strand shows that Huawei currently accounts for 59% of Germany's 5G network construction market share, and the situation is similar in 4G. However, the law only applies in the future tense, but this review in Germany also covers the past tense of the entire 5G network, that is, the equipment that has been installed and put into service. This means that German mobile network providers may face the situation of replacing parts supplied by China. The major mobile network providers were wary of media inquiries, but Deutsche Telekom said it was not involved in political speculation and that decisions on which key components to use were based on their own censorship, not on the basis of release or prohibition decisions under review by the Federal Information Technology Security Agency.
In short, in the absence of a technically reserved backdoor, it is still possible for Germany to exclude Chinese suppliers, citing national security grounds. Some Western countries are concerned about China's momentum in the field of scientific and technological innovation, and this concern is not limited to the West's dependence on China in some technologies.
It can be seen that the Netherlands has further strengthened export controls on semiconductors to China, and even on sensitive technologies that China relies on, some Western countries have taken a tougher stance.
The United States has been lobbying the Netherlands and Japan to join forces to curb China's development in advanced semiconductors, also on the grounds of national security interests. On March 8, the Dutch government issued a document announcing new export controls on advanced semiconductor technology provided by ASML to China. In fact, since 2019, the Netherlands has adopted export controls on China on ASML's most advanced EUV lithography machine, and this time, the control will be extended to the sub-advanced DUV lithography machine. The Netherlands is in a key position in the U.S. strategy to curb China's production of its own advanced semiconductors. Dutch Prime Minister Mark Rutte has publicly stated that in the new international order, he has chosen to side with the United States rather than China.
Therefore, some Western countries are not only afraid that they will unilaterally rely too much on China in key technologies, but some Western countries also tend to be cautious or even tough in key technologies that China relies on in order to stay ahead of China in this field. In reality, China is dependent on the West in many areas of technology.
There is interdependence between China and the West, and for both sides, a geopolitical conflict will mean huge economic losses. The report defines Western countries as the West in the traditional sense and pro-Western Asian countries that have imposed sanctions on Russia or participated in sanctions in the Russian-Ukrainian war, and may also participate in sanctions against China if there is a geopolitical conflict with China.
China relies heavily on the West for many important key products, such as machinery, highly specialized equipment and semiconductors.
In terms of specific products, China's largest trade deficit is reflected in semiconductors, in 2021, China's semiconductor imports were $433 billion, accounting for 16% of total imports, the highest value part of all imported products, of which imports from the West accounted for 32% of all semiconductor imports. The report concludes that in China's (mainland) semiconductor product imports, the West and Taiwan account for 68% of the total imports.
According to the report, Western technology is important to China for two reasons: first, China is faced with technological progress to compensate for the negative impact of aging population on economic growth, which is crucial for China to escape the middle-income trap; Second, Western technology is concerned about China's place in the U.S.-China race. The original intention of the study is to provide advice on the possibility of Western sanctions in the event of a geopolitical conflict, and in the study, the West holds the card of "China's dependence on the West to a large extent for imports and technology".
In some calls for a tougher stance on the China line, another perspective from the economics community is presented. Shulrick pointed out that since the Russian-Ukrainian war, some accusations against China have been exaggerated in the atmosphere and trend of the European Union and Germany in terms of public discussion and policy tougher against China. He said it reminded him of Germany in 1914, when Germany was in a bit like today's rising economic China, looking around and feeling like there was no place for it.
Shulrick bluntly said, "In rare earths, batteries, photovoltaic industries and some pharmaceuticals, we do rely on China, but we cannot confuse Russia and China." He pointed out that the West should maintain dialogue with China, and the more we push China into the corner, the more we push it into Russia's arms.
Shulrick said the coronavirus pandemic and the 2022 energy crisis pale in comparison to a tough economic war with China that would tip the global economy into recession. On the bright line, Shulrick advocates clear words and actions, but there is still room for it. So far, he notes, China has used little economic power as a weapon, and China itself knows all too well what the consequences are. Russia is a special case, and China is different. In Shulrick's view, a cold peace with China is better than a cold war with China.