The Challenge of Chinese Technology

European governments have also gained a greater awareness that Chinese ambitions of leadership in the digital space is a challenge increasingly confronting them, and to which they will need to respond. Very often, Europe’s capabilities in this regard are perceived as weak. It is true that Europe does not have a digital economy to rival that of either the US or China. There is, for instance, no European counterpart to Twitter and Facebook, or to Alibaba and Tencent. Nevertheless, Europe should not be underestimated as a player in cyberspace. Europe has levers and needs to learn how to use them again.

Europe remains the largest and wealthiest consumer market in the world, particularly with the EU’s Common Market at its core. This market power, in combination with the generally high regard in which EU rulemaking qualities are held, have resulted in the so-called “Brussels Effect”, where EU regulations either become de facto global ones, or profoundly influence policymaking elsewhere. In the digital realm, the best example of this effect is the General Data Protection Regulation (GDPR), which has reshaped data protection policies worldwide and has been cited as a major influence in China’s ongoing legislative process on personal information. This includes, for instance, significant similarities in the definition of terms and concepts, as well as the introduction of GDPR-based ideas on data minimisation and purpose limitation. The upcoming Digital Markets Act and Digital Services act could fulfil a similar role. In this and many other areas, Europe has much to gain from leading by example in upholding an actual rules-based global cyber order. This might mitigate the destabilising impact of the escalating play of power politics characterising Sino-US tensions.

Second, the EU does have considerable industrial strength in a number of areas, most notably telecommunications. Outside Huawei, only Nokia and Ericsson are able to provide a full suite of 5G infrastructure, producing strong European voices in related standardisation processes. Other European companies have world-leading skills in specific and strategically important niches of technology value chains, such as the Dutch company ASML that produces manufacturing equipment for advanced semiconductors.

In the realm of the digital economy, attempting to kneecap the development of the Chinese digital sector, as the Trump administration tried through its sanctions against Huawei and other businesses, must be taken off the table. Leaving aside discussions about the legitimacy of such an effort, it likely comes at a near-unacceptable cost in the short run, disrupting highly complex production and value chains that developed over decades. Bank of America calculated that completely moving multinational companies’ export operations out of China would cost 1 trillion US dollars in the next five years, without considering the impact on subsequent operating costs. In the long run, this approach will only spur China to accelerate its efforts towards technological self-sufficiency, which will be dangerous for stability. In the diplomatic realm, it is counterproductive to rebuff any Chinese idea or proposition simply because it is Chinese. Some modus vivendi on norms for state conduct will need to be found in the digital and cyber domain. Europe should develop a variable geometry of cooperation with China where necessary, rather than simple rejection.

This will require a mental leap. For starters, it is time to stop underestimating China. For decades, self-satisfied Europeans have operated on the assumptions that only liberal democracies are capable of competent governance. It automatically followed that non-democratic China could only progress, in digital technology or elsewhere, by following Western examples, or by cheating, intellectual property theft or other nefarious behaviour. However, this is only part of the story. China’s government, and its businesses, have been far more competent than they are often given credit at least in the digital space. Huawei is the single largest supplier of patents for the new 5G standard, China-based subcontractors have developed unique manufacturing and logistical capabilities that enable the production of the devices we take for granted, and Chinese scientists are making rapid advances in technologies ranging from AI to quantum computing. None of this would be possible through theft alone.

China has also dedicated considerable attention to the question of how to govern cyberspace, and has come to set the pace in many related developments. Much though Europe might disagree with China’s policy responses to the digital challenge, it must also be admitted that Beijing’s diagnosis of those challenges has been largely accurate, and often made far earlier than in the West. China has argued in defence of sovereignty in cyberspace for over a decade, European governments have increasingly called for digital sovereignty over the past few years, and the US’ actions against China are, at least in practice if not in rhetoric, a clear expression of sovereign power. In the digital economy, China is clearly moving ahead with new modes of regulating large online platform companies, through anti-trust rules and fintech regulations. In contrast, European governments have only just started to grapple with these issues.

At the same time, Beijing’s ability to influence global cyberspace should not be overestimated either. The idea that China wants to reshape the Internet or the digital sphere in its own image is a pervasive one, but usually light on detail in terms of how Beijing could achieve this even if it tried. China’s ability to force through the adoption of technologies and standards internationally is limited, and the more aggressively it tries to do so, the greater the backlash will become.

Beyond this, a regime-centred approach must be replaced with a more multivariate one. Currently, China is primarily perceived through the prism of the dreary democracy-dictatorship dichotomy. This view reduces all action by Chinese action to a part of a malicious effort to spread authoritarianism around the world. Yet the Digital Silk Road, or China’s growing participation in online standard setting, are as much the outcome of logical business decisions as they are political. Like Google or Apple, Alibaba and Huawei also want to expand their global market share and monetise research and development through inclusion in technical standards. Some room must be found for Chinese players to participate in the global digital economy – which comes with the added benefit of making them stakeholders in important elements of a rules-based order.

Finally, European governments should recognise that their ability to effect policy change in Beijing is small and shrinking. China has decided it will become a global technology leader, and will not be led to deviate from that objective by a formal statement lodged by a foreign ambassador. Neither will it meaningfully change its censorship or surveillance practices, or any other policy it deems important to its own economic or security interests. Therefore, instead of merely calling on Beijing to reverse a decision, policymakers need to focus on setting their own house in order. If they are concerned about Beijing’s greater presence in global technology standards, for instance, they can better fund domestic research and development, as well as delegations to standards development organisations. China now spends a bigger percentage of its GDP on research and development than two thirds of EU member states. It has also increased its funding for university research by 10 per cent every year. Worries about China’s growing clout in developing nations can be countered by coming up with a better, more attractive offer that makes more efficient use of the 75 billion euros the Union and its members spend on development aid every year. Such solutions, although politically more costly, also come with the benefit of building resilience against a broad range of risks, not just China-related ones. It also permits the concentration of scarce political capital on those issues and priorities where compromise with Beijing is possible.

By Dr Rogier Creemers, Assistant Professor in Modern Chinese Studies, Leiden University

Article category: Digital Technology and R&D