Competing with China’s Digital Silk Road
This commentary is part of CSIS's Global Forecast 2021 essay series.
Former U.S. secretary of state Dean Acheson’s call to create “situations of strength” is reemerging as a compass for U.S. foreign policy. But that phrase also aptly describes the challenge that China’s global economic activities present, especially in developing and emerging markets, where it is delivering digital infrastructure that shifts the strategic landscape in its favor. The Biden administration needs a strategy for competing with China’s Digital Silk Road that begins at home.
The next phase of U.S.-China technology competition is just starting. Last year, an initial wave of countries decided against including Chinese equipment in their 5G networks. There are degrees of difference among their decisions, including whether suppliers are singled out by name and whether equipment is entirely banned or limited to the network periphery. But overwhelmingly, these countries are wealthy democracies. That leaves the rest of the world, including a long list of countries with varying levels of development and governance, where competition is set to intensify.
China is racing ahead in many of these markets through its Digital Silk Road, which sits at the intersection of three major state-backed initiatives. It was first introduced in 2015 as part of Chinese leader Xi Jinping’s signature foreign policy vision, the Belt and Road Initiative. It also advances “Made in China 2025” and “China Standards 2035,” through which Beijing aspires to lead advanced manufacturing and standard setting, respectively. There is plenty of hype in each of these efforts, but they signal serious ambitions. The Digital Silk Road advances China’s bid for technological independence at home while moving it toward the center of global networks. It takes aim at next-generation technology and next-generation markets.
The Digital Silk Road is well-timed, dovetailing with powerful, longer-running trends. China is already the world’s leading exporter of communications technology, and it is increasingly competitive in delivering advanced systems, such as subsea cables, that only the United States and its allies could provide just over a decade ago. Digital infrastructure is becoming even more essential to modern economies with the arrival of faster networks, cheaper sensors, and the proliferation of connected devices. The potential for growth in the developing world is vast. Asia and Africa, where demand for international bandwidth is growing fastest, are expected to account for 90 percent of global population growth through 2050.
More recent drivers are accelerating the Digital Silk Road. Chinese suppliers, encountering greater scrutiny in advanced economies, are now doubling down in developing economies. They are also responding to Xi’s call at home to build “new infrastructure,” including 5G networks, data centers, and other digital infrastructure, which will create greater capacity for exporting these systems abroad. Meanwhile, the pandemic has battered economies while making digital infrastructure even more essential. Compared to large transport and energy projects, digital infrastructure projects tend to take less time to deliver, cost less, and are less disruptive to their immediate surroundings, all advantages after a bumpy start to China’s Belt and Road.
Beijing is hoping Washington is too consumed with domestic challenges to respond. As China builds the systems that underpin communications, finance, and essential government functions in capitals around the world, it is accumulating intelligence and building coercive power. Vulnerabilities are already materializing, from the repeated security failures at the African Union’s headquarters to Papua New Guinea’s data center disaster. Countries aiming to “leapfrog” in their development risk falling into digital dependency. China has already demonstrated a willingness to coerce its partners with other forms of connectivity.
But this challenge, if channeled correctly, could strengthen the U.S. economy. Exports support well-paying jobs, growth, and investments in research and development. Either U.S. workers and companies can enjoy those benefits by succeeding in foreign markets, or China and other countries will. The more of the global market Chinese firms control, the greater their ability to set standards and develop the next generation of transformational technologies. The United States does not have a domestic market of China’s size upon which to fall back. To achieve the scale necessary to remain at the leading edge of innovation, U.S. companies need to compete in foreign markets. And to compete, they need a compelling sales pitch.
The United States needs a new approach that appeals to the aspirations of developing countries. The Trump administration’s main argument to countries considering including Chinese equipment in their 5G networks was centered around security concerns. Those concerns are compelling, but even wealthy democracies were reluctant to swallow the additional costs of safer alternatives. In the developing world, resources are even more limited, and many officials assume that any foreign provider could present a security risk. Put simply, fear won’t stop China’s Digital Silk Road. Competing requires putting forward a positive vision and offering attractive alternatives.
The Biden administration has several opportunities to meet this challenge, starting with its efforts at home. As part of a domestic infrastructure package, it can improve connectivity for Americans while investing in technologies that shift the global communications playing field in favor of the United States and its allies. Open RAN, for example, allows operators to mix and match different network components from different vendors rather than choosing and potentially being locked into a single supplier. U.S. companies are leaders in producing the key components and software for these systems, which could mature faster and scale globally with domestic deployments.
The Biden administration can also strengthen the position of the United States in global subsea cables networks. Subsea cables carry the vast majority of international data, including everything from streaming videos and telephone calls to transactions for credit cards, ATMs, and stock exchanges. To encourage these connections and the resiliency they provide, the administration should protect existing cables and improve the cable planning process by creating a single federal point of contact. While Team Telecom improves the predictability of the cable approval process at home, the U.S. State Department should redouble its efforts to remove obstacles to cable installation and repair in foreign markets.
As it looks to foreign markets, the Biden administration inherits an expanded economic toolkit that requires better coordination. The U.S. Development Finance Corporation has equity authority and an increased portfolio cap, which should be used to put a greater emphasis on digital infrastructure. The U.S. Export-Import Bank has lowered domestic content requirements for 10 sectors, including telecommunications, which should expand its pool of potential projects. Other agencies—including the Departments of Defense, State, Commerce, and Homeland Security, U.S. Agency for International Development, and Trade and Development Agency—all have important capabilities to bring to bear. The National Security Council needs a point person for global connectivity issues, so these efforts become at least the sum of their parts, and hopefully more.
Digital infrastructure should be near the top of the list as the Biden administration looks to deepen cooperation with partners and allies. Any new administration needs time for consultation, and thankfully, there is promising work upon which to build. The Blue Dot Network brought together the United States, Japan, and Australia to certify high-quality infrastructure projects. That basic effort should continue in some form and expand to include European partners, which were initially reluctant to join due to concerns over environmental standards. The existing partners should move forward with any environmentally sound projects already in the pipeline while working to bring European partners on board.
Within the digital realm, smart cities should be a high priority for allied cooperation. Chinese companies are already using the pandemic to sell more surveillance systems and other smart city systems, often under the “safe city” brand. Their products come with big promises for economic growth, lower crime, and artificially low prices that often neglect operating and maintenance costs. In addition to raising human rights concerns, these “safe city” systems have a mixed track record when it comes to delivering on their promises. Experiences in Kenya and Pakistan point toward data security and operating issues. These shortcomings provide an opening for better alternatives.
The United States and its allies should put forward a higher-standard model for smart cities. For example, they could offer a “Sustainable City” certification with financial support that emphasizes commercial viability, energy efficiency, social safeguards, and data security. This is another area where U.S. domestic and international efforts strongly align. U.S. and Japanese companies are already collaborating, including a project in Las Vegas, where Dell and NTT are suppliers. More cutting-edge examples of U.S. smart cities will position domestic companies to succeed abroad. The State and Commerce Departments should bring U.S. mayors on a global roadshow to share their experiences with foreign counterparts.
All of these efforts could feed into, and benefit from, broader allied cooperation on technology issues. The list of areas for cooperation is endless, spanning both defensive and offensive measures, from coordinating export controls and strengthening supply chains to pooling resources for joint R&D and investment funds. But while a foundation is put into place for broader allied cooperation, the Biden administration should put some early points on the board, meaning actual projects, and build further from there. As Acheson was fond of saying, “the best thing about the future is that it comes one day at a time.”
Jonathan E. Hillman is the author of The Emperor’s New Road: China and the Project of the Century and director of the Reconnecting Asia Project at the Center for Strategic and International Studies in Washington, D.C.
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