Call it by its real name – economic warfare. The US wants to control all of the things they do not actually produce.

Photo: A man stands in front of a Huawei store in Beijing on April 27. The company remains a global leader in telecoms innovation and retains a dominant market position both globally and at home. Photo: Simon Song

06 June 2022 | David Dodwell | South China Morning Post

As I read the Post’s recent editorial, defining war as “the willingness to suffer significant self-harm to hurt a rival even more”, I was reminded of Donald Trump’s crass March 2018 tweet that “trade wars are good and easy to win”.

For a country so profoundly familiar with wars worldwide, it is a puzzle to me where such myopic naivety comes from, and why it persists.

Surely the principal lesson of war is that it is catastrophic for all parties concerned, bystanders included, and should be avoided at all costs. Unlike democracy, which Winston Churchill described as “the worst form of government – except for all the others that have been tried”, wars are the worst way of settling arguments, with no exceptions.

The same surely goes for trade wars, and in particular the technology war that the Trump administration launched on China in 2018, and on which President Joe Biden’s administration has doubled down.

As Secretary of State Antony Blinken elaborated recently, “China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it.”

While I flatly disagree with Blinken’s ideas on Beijing’s intent, there can be no doubting China’s rising capabilities, or the Biden administration’s determination to pursue its technology war against China – whatever the eventual self-harm, and damaging consequences for all concerned.

US Secretary of State Antony Blinken gives a speech outlining the US strategy towards China, in Washington on May 26. Photo: Bloomberg

US Secretary of State Antony Blinken gives a speech outlining the US strategy towards China, in Washington on May 26. Photo: Bloomberg

I was reminded of this by the Canadian government’s announcement on May 20 that it would join the US, the UK, Australia and New Zealand – the “Five Eyes” intelligence-sharing grouping – in banning Huawei from any involvement in the country’s 5G mobile networks.

Since May 2019, when Washington put Huawei on the “Entity List” of companies deemed a threat to US national security, a further 260 Chinese companies have been barred from selling into the US market, and from acquiring a wide range of technologies from American companies.

The aim is to hobble their access to the latest technologies, in particular the newest and most powerful microchips, and to blunt China’s competitive progress.

A man stands in front of a Huawei store in Beijing on April 27. The company remains a global leader in telecoms innovation, and retains a dominant market position both globally and at home. Photo: Simon Song

A man stands in front of a Huawei store in Beijing on April 27. The company remains a global leader in telecoms innovation, and retains a dominant market position both globally and at home. Photo: Simon Song

This has been accompanied by a global blizzard of diplomatic activity to pressure other governments to agree with the US on the “China threat” and follow its lead in barring Huawei from their telecoms networks.

Three years into this attritional war, Huawei remains emblematic of the China technology challenge, and the primary target in efforts to protect US national security. So how successful has the effort been? How much has it hurt China’s technological advance? And how much self-harm has been inflicted in the process?

It seems Huawei’s global smartphone business has been hard hit, though its protected foothold inside the vast Chinese smartphone market has provided insulation.

A dozen or so of the US’ closest allies have joined in the 5G ban, but few of Huawei’s long-standing clients across Southeast Asia and Africa have severed links.

A recent report from the New York-based Council on Foreign Relations says Huawei still accounts for 70 per cent of 4G networks in Africa, with most expected to stick with it as they gradually upgrade to 5G. The company claims today to serve 140 5G networks in 59 countries.

This is in part because, despite repeated US expression of security concerns, no American companies have been able to offer an alternative (Huawei’s main competitors are Ericsson in Sweden and Nokia from Finland).

As the Council on Foreign Relations report said, “no US company offers an end-to-end 5G solution … Washington cannot expect countries to sit on the sidelines and forego upgrades to their networks while the US gets its act together.”

At Brussels-based think tank ECIPE, Hosuk Lee-Makayama recently noted: “Although cut from state-of-the-art chip sets … Huawei’s footprint on the global carrier equipment markets seems to have suffered relatively little.”

This is reflected in Huawei’s recently unveiled 2021 results. While revenue fell sharply from US$134 billion in 2020 to US$100 billion last year, net profits virtually doubled to US$18 billion. As rotating chair Guo Ping noted in the report, “we have kept plugging away, improving the quality of our operations and investing in the future”.

While Ericsson and Nokia have made gains in international markets, the awkward reality is that China remains by far the world’s most innovative 5G market, and Huawei its clear leader.

China’s Ministry of Industry and Information Technology says the country now boasts 1.43 million 5G base stations – 60-70 per cent of the world’s total, and about one for every 1,100 people. By comparison, the US, with 100,000 5G base stations, has one per 3,300 people.

Meanwhile, Huawei spent billions stockpiling hi-tech chips ahead of the US ban, and continues to make stupendous technology investments at home. Moreover, China now claims self-sufficiency in 28- and 14-nanometre chips, with 22,000 new semiconductor manufacturers and developers registered in the country since 2020.

So has the US’ technology trade war been good or easy to win? The answer on both counts has to be a firm “no”. Huawei remains a global leader in telecoms innovation, and retains a dominant market position both globally and at home.

Given China’s progress in innovation and sheer market size, the idea of decoupling seems preposterous: international competitors want a presence in China’s market, and to benefit from its technological development.

Will the technology war inflict substantial self-harm on the US economy? Only time will tell, but I think my initial observation holds: wars – including technology wars – are the worst way of settling arguments, with no exceptions.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view