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Will China Use the COVID-19 Pandemic to Advance its Economic Interests? The Case of Technology Standards
The Huawei logo is seen on the side of the main building at the company's production campus on April 25, 2019 in Dongguan, near Shenzhen, China.
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Will China Use the COVID-19 Pandemic to Advance its Economic Interests? The Case of Technology Standards

Thomas J. Duesterberg

China has been nothing if not brazen in the ways it tries to strongarm and hoodwink nations and firms which can be useful to achieving its goals. In the midst of the world’s worst health care crisis since the so-called Spanish and Hong Kong flu epidemics in the 20th century. China is now trying to snatch victory from defeat over the domestic pandemic, which clearly originated in Wuhan. In the last weeks it is systematically going around the word to assert the superiority of its governance, health care and technology models, as several of my Hudson colleagues have chronicled. As the U. S. and Europe struggle with containing the pandemic, China appears ready to exploit the situation and promote its efforts to overtake the West and its allies in technology and political influence. The U. S. needs to remain vigilant in these tough times and not neglect its strategies to counter the Chinese offensive, especially in the well-vetted areas of 5G telecommunications and other technologies of the future. The adoption of standards in this field may be a test case of U.S. resolve and ability to act effectively in international forums.

The clearest example of the Chinese strategy is revealed in its recent, highly coordinated and politicized efforts to assist Europe with the pandemic, and especially in Italy, the hardest hit by the aggressive virus. On March 20 China airlifted 30 tons of emergency medical supplies to Rome and Italian foreign minister Luigi Di Maio ostentatiously released a video of the airlift, while asserting that it was the direct result of his personal plea to Chinese leaders. He didn’t mention that Italy had earlier done President Xi a similar good deed with medical help in the first months of the Wuhan outbreak, nor that Italy was paying for the goods. Di Maio was the force behind Italy’s 2019 decision to become the first West European country to join China’s Belt and Road (BRI) program.

Alibaba mogul Jack Ma also donated millions of protective masks and related medical supplies to Italy. Chinese telecom suppliers later joined the program and broadened donations to the Netherlands and Greece. The Dutch are now considering how to expand their nascent 5G network and have not ruled out Huawei and other Chinese suppliers, and Greece is another member in good standing with the BRI and sold its historic port of Piraeus to the Chinese in 2016. EU foreign minister Josep Borrell compared the Chinese initiatives to a “battle of narratives” and observed that: “China is aggressively pushing the message that, unlike the U.S., it is a responsible and reliable partner.” We can be sure that China is replicating this push around the world, along with the disgraceful propaganda that the U.S. army originated the pandemic.

Even though it is difficult to look much beyond the new few weeks, it is clear that China will try to exploit its new narrative to push wavering countries to its camp through the BRI program and related diplomatic initiatives. The U.S. has for several years pushed back against the state-sponsored telecommunications giants Huawei and ZTE, which are among the principal beneficiaries of Chinese economic and political diplomacy. It is not an exaggeration to argue that their attempts to win favor in Europe and elsewhere extend to adopting 5G and other technology offerings which comprise the core of China’s effort to dominate the industries of the future.

One of the important but less visible parts of the Chinese master plan is to influence international standards setting bodies to win acceptance of its technologies and thus give them first-mover advantages. Huawei in recent years has promoted the idea—or narrative—that its 5G technology is superior to that of the West. It tries to buttress this assertion by counting the number of patents the company files and how many of these are standard essential patents (SEPs). Huawei self declares its own patents as SEPS much more frequently than its competitors. It is important to note that SEPs are not agreed by consensus of experts, as are normal standards, but only claimed as such by their originators. But the import of such counting is belied by the fact that the Chinese firms only infrequently go to the trouble and expense of filing for patents outside of China, as does any technology inventor who really has groundbreaking new products, especially those that become SEPs. Fewer Chinese patents are cross-referenced by other inventors than for other 5G leaders in the U.S., Europe, Japan and Korea. In the broader technology arena, over 90 percent of high technology products used in China rely on non-Chinese standards and related intellectual property.

As part of the battle over narratives China is very active in international standards setting bodies and often tries to win acceptance of its technologies through organized group voting and sending large teams of engineers to the technical meetings which adopt new standards. At a time of economic and health care crisis in the U.S and Europe, it is difficult for firms or independent inventors in start ups to attend international meetings. Even in normal circumstances it is expensive and time consuming to send large groups to these meetings.

But the more serious impediment in the U. S. is that Huawei and many other Chinese companies are listed on export control lists, which means among other restrictions that any sharing of new or old technical information with them is prohibited. Such sharing is part and parcel of all standards making processes in market economies, which is accomplished employing a consensual merit- based model. If American firms send participants to standards meetings where Huawei or other sanctioned firms are present, they are potentially subject to criminal penalties. U.S. industry has requested an advisory opinion from the Commerce Department to clarify the situation and to grant some relief from the effective ban on participation when companies on the control list, especially Huawei, are present. The request has languished without response for over a year.

5G and related Internet of Things (IoT), artificial intelligence and autonomous vehicle technologies are rapidly evolving, and so are efforts to establish standards for them. Lack of U.S. participation in this fast-moving environment has serious costs for U.S. technology leadership. Already, U.S. firms whose engineers had leadership roles as chair or vice-chair of committees in the 5GAA telecommunications standards organization have ceased participation. The same is true for the bodies setting standards for autonomous vehicles, voice and audio technology for 5G, machine-to-machine (IoT) protocols, and the industrial internet. As Deputy Assistant Secretary of State for Cyber and International Information and Communications Policy Robert Strayer summarized in a speech at the Hudson Institute on standards competition last December: “Global competitiveness of U.S. industry depends critically on standardization, particularly in the sectors that are technology driven.”

As China mobilizes to exploit what is perceives as an excellent opportunity to push its preferred narrative of technical prowess and global leadership in 21st century governance, the U.S. and its allies must step up their counter efforts. Allies are seriously hampered by the global pandemic, but the U.S. has additional constraints in actively engaging as technical standards are hammered out in real time (including remotely in today’s circumstances). The least the Trump administration could do is to issue clear guidance on participation in international standards bodies when firms subject to export controls are present. As DAS Strayer argued, we do need to find balance between our security requirements and the ability to compete with mercantilist actors such as, but not limited to, China. The U.S. will overcome the COVID-19 challenge but it needs to keep its attention on efforts to exploit the crisis for long term economic advantage at the same time.

Read in Eurasia Review

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