As China Fights For Huawei, Should India Be Wary of Its 5G Entry?

After the Canadian government arrested Meng Wanzhou, chief financial officer and daughter of the founder of Huawei, a Chinese telecom equipment manufacturer, upon an extradition request by the United States, relations between China and Canada have taken a nosedive.

In barely concealed retaliation, China arrested two Canadians over the past month, and then summarily re-sentenced a third, a convicted drug smuggler to death. The official rhetoric from Beijing has become increasingly strident, like what we saw during the Doklam stand-off. Beijing has taken off its gloves and is baring its teeth.

Such political aggression is part of President Xi Jinping’s foreign policy, and the Chinese establishment might well justify the impatient, aggressive, gangster-like diplomacy as befitting a great power of its stature.

China’s Stern Warning

It may be heavy handed, but surely protecting one of its citizens against perceived injustice in a foreign country is a legitimate goal. Besides, beating up a soft Western country like Canada warns governments around the world not to mess with Chinese business leaders.

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China might not have acted so forcefully were it to concern an ordinary citizen. To be fair, all governments pay more attention to cases involving the rich and the famous.

But in taking up the cudgels on behalf of Huawei’s CFO, Beijing has reinforced the growing understanding that we cannot treat its ostensibly private corporations as being independent of the Chinese government and of the Communist Party of China.

This has profound implications for global economics and public policy. Globalisation rests on the premise that private corporations are concerned with generating returns for their shareholders and are not instruments promoting the national interests of the countries of their origin. Take that away and question marks quickly start appearing on openness to foreign investment, outsourcing, lower tariffs and immigration.

Should Huawei be treated as a private multinational corporation or as an instrument of the Chinese state? This question has great significance today as countries around the world, include we in India, are pondering on choices for their fifth generation (5G) mobile network infrastructure.

This week, The Economic Times reported, quoting Dr A Paulraj, head of a government-appointed panel looking at 5G as saying that he was “not sure technology from European companies has lesser security problems, than say, a Huawei.” He is right. It would be very naive to believe that only Chinese manufacturers can have backdoors. That doesn’t mean, though, that they pose the same risks to national security, or are at par from a strategic perspective.

No European country is building roads in disputed regions on our Himalayan border. No Scandinavian country is financing massive infrastructure projects in territory that we rightly consider as ours. The greatest disagreements we have with European countries seems to be over agriculture policy and trade issues, and I can’t recall the last time one of them carried out a missile test or showed footage of military exercises when negotiations entered a tense phase.

In other words, regardless of the technical merits of equipment produced by Chinese and other foreign manufacturers, the two are very different from a political and strategic perspective. Furthermore, if China is willing to arm-twist the Canadian government for Huawei’s CFO, what might else it do in support of the company’s business interests? Telecom equipment has network effects, so once you are locked in, it’s very difficult and costly to get out.

How Can India Play it Safe With the Dragon on 5G

So how should we proceed with 5G? Should we let China in? If so, to what extent?

First, it is in our interest to create a level-playing field for all equipment vendors, including Chinese manufacturers. No one must be excluded from submitting proposals and bids merely because of national origin. The greater the competition in technological and financial matters, the better. That said, decisions involving strategic choice of technology and network architecture must be made at the level of the Union Cabinet. If Chinese manufacturers are short listed, the government should base its decision considering on the future trajectory of India-China relations. From what we can see, I would advise against choosing Chinese.

Second, we must distinguish network infrastructure from customer equipment. The latter is what firms and consumers purchase. Like the case today, it is in India’s interests for broadband modems and smartphones to be inexpensive so that they are broadly affordable. Chinese manufacturers should be welcome to participate in the end-user and consumer markets.

For the first time in the telecommunications industry, India’s choice of 5G will have global implications.

Instead of trying to put pressure New Delhi, Beijing might try to swing the decision by using low prices. After all, our L1 mindset and scamification of big-ticket procurements gives foreign interests a handle to influence our decisions.

(Nitin Pai is director of the Takshashila Institution, an independent centre for research and education in public policy. This is an opinion piece. The views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)