At Huawei's sprawling installation at last month's Mobile World Congress, a forest of flat panel screens advertised the Chinese telecom giant's offerings in 5G mobile broadband and its application to industries ranging from manufacturing to health care. One panel proclaimed that telephone companies installed 171 private 5G networks for businesses last year, up from 64 in 2021. I asked the Huawei employee manning the display, "Is that worldwide, or just outside China?" "Oh, that's outside China," he replied. "In China, there are more than 10,000, and 60 percent of them are in manufacturing."
We saw what soft power can do on March 10 when Iran, Saudi Arabia, and China announced that Beijing had mediated a resumption of diplomatic relations between the two Persian Gulf rivals. China's military presence in the Middle East is negligible compared to America's, but the Gulf States have embraced Beijing's vision of digital transformation. The Iran-Saudi rapprochement should be a wake-up call for Washington. China's soft power supported a diplomatic exploit that makes Beijing a major actor in the region.
China not only got a jump on the West in 5G network quantity—with 70 percent of the world's installed capacity—and quality—with download speeds roughly triple those in the U.S. It also has a large and growing lead in so-called 5G2B, or 5G to business applications, which apply artificial intelligence solutions for everything from unloading freighters to manufacturing robotics.
The Western competition is fragmented, underinvested, and poorly positioned to compete with China. The situation begs for urgent action by Western governments.
Mobile broadband drives China's booming exports to the developing world. In January 2019, China exported $40 billion to the Global South and nearly twice as much, $74 billion, to the U.S. and Europe. By November 2022, the developing-world total had risen to $75 billion, matching China's exports to the U.S. and Europe that month. While China's exports shrank by 9 percent in dollar terms during 2022, exports to Southeast Asia surged by 20 percent.
The digital economy, wrote the International Monetary Fund in a January 9 blog post, presents a "promising path for boosting Asia's productivity," adding, "Digital technologies can increase the efficiency of the public and private sectors, expand financial inclusion, improve access to education, and open new markets by allowing companies to serve distant customers."
China has taken a lead in digital technology, namely the application of broadband and AI to manufacturing, logistics, and services. Beijing has proclaimed its intent to dominate AI-driven technology, and the data show that it's not blowing smoke.
China's prowess in telecom infrastructure and applications amplifies its soft power around the world. Indonesia, Turkey, Bangladesh, Thailand, and other Asian countries are building out their digital infrastructure with Chinese technology. Even India's telecom providers depend on Chinese hardware, despite the strategic tension between New Delhi and Beijing.
Saudi Arabia and the United Arab Emirates are spending billions on Chinese technology, including 5G broadband networks and AI-enhanced solar power. Turkey's trade with China has doubled in volume since 2020, with financing from Beijing that helped pull Turkey back from the brink of hyperinflation.
Earlier in 2022, the United Arab Emirates broke off negotiations to buy America's F-35 stealth fighter after Washington demanded that the UAE exclude 5G mobile broadband systems that it had planned to buy from Huawei. The UAE stuck to its deal with Huawei and bought 80 French Rafale fighters instead.
Huawei's Red Sea Project in Saudi Arabia, signed in 2019, is building an AI-enabled solar power network that will provide all the power for a city of one million people.
It's clear that American-led efforts to suppress China's industry leadership have failed. Restricting rivals' access to technology has never worked in the long term, and in this case, it hasn't worked in the short term, either. Without access to high-end chips, Huawei's handset business withered. But broadband infrastructure and AI business applications run on older chips that China can produce at home. Handsets are becoming a commodity business, while the full economic potential of broadband will be embodied in business applications.
Think of railroads, the transformative technology of the mid-19th century. Whether the train traveled at 40 miles an hour or 80 miles an hour wasn't a decisive issue. Neither is the clock speed of computer chips.
We need to compete head-on with China's global leadership in 5G broadband and beyond. In 2017 the Trump administration rejected a proposed plan for a national 5G program. Now we require a program that marshals the combined resources of the West.
The United States should lead a consortium of firms from friendly countries including Sweden, Finland, South Korea, and Japan to create products that can compete with China's offerings. Huawei alone spent $22 billion on R&D last year, compared to $4.8 billion for Nokia and $4.7 billion for Ericsson, its two largest competitors. Huawei's R&D budget, moreover, has twice the punch in China, where costs are much lower than in the West.
Western governments should encourage joint product development by key corporations, subsidize R&D in broadband and its business applications, and establish global standards for 5G and beyond.
David P. Goldman is Deputy Editor of the Asia Times and a Washington Fellow of the Claremont Institute's Center for the American Way of Life. His book You Will be Assimilated: China's Plan to Sino-Form the World appeared in 2020.
The views expressed in this article are the writer's own.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
