snapshots

Aug 7, 2019 | 21:33 GMT

3 mins read

China, India: Beijing Threatens 'Reverse Sanctions' if New Delhi Bans Huawei

(Stratfor)
The Big Picture

As the tech war between China and the United States rages on, the rest of the world is increasingly finding itself caught in the crossfire. This is especially true for middle powers in the Indo-Pacific region and Europe, which already face Washington's threats of reduced security cooperation should they partner with Chinese telecommunications company Huawei to roll out their 5G networks.

What Happened

China has threatened to place "reverse sanctions" on Indian companies operating in the country should New Delhi decide to block Chinese tech giant Huawei from its market, Reuters reported Aug. 6. According to the leak cited by Reuters, the Indian ambassador to China reportedly met with Chinese officials on July 10, where they discussed Beijing's concerns about the U.S. campaign to bar Huawei from the world's 5G infrastructure. During the meeting, Beijing also allegedly said that it hoped India would make its own "independent and objective decision."

Why It Matters

China has used a mix of incentives and threats to deter U.S. allies and regional states from joining U.S.-led initiatives aimed at countering Beijing in other security domains, including its regional infrastructure projects and its operations in the South China Sea. This latest threat against India — with roughly 1.3 billion people, a potentially lucrative future market for Huawei — could indicate that Beijing is expanding the use of such coercion tactics to protect its technology companies. 
 
Compared with companies from other major global economies, Indian firms still have a relatively small presence in China. But several companies operating in manufacturing, health care and outsourcing — namely, India's Infosys and TCS — could be expected to face possible market restrictions and regulatory hurdles from China should Beijing follow through on its threats.

China may also choose to apply informal trade restrictions or customs delays for inbound Indian products — similar to those it imposed on Australian coal shipments, moves arguably also linked to Australia's ban on Huawei. In theory, Beijing could even go so far as to blacklist Indian firms under its newly-established "unreliable entity list." However, any serious action against Indian firms would risk damaging China's bilateral relations with New Delhi at a time when Beijing is seeking to solidify support from as many countries as possible to fend off U.S. pressure.   

The threat could be a sign that China is willing to take a more aggressive stance against other countries blocking Huawei's involvement in their 5G networks at the behest of the United States.

It is also worth noting that with no good alternative (beyond non-U.S. competitors like Nokia and Ericsson) and little incentives to offer, U.S. efforts to block Huawei's 5G rollout have continued to face significant headwinds — especially among states in the Indo-Pacific region and sub-Saharan Africa. For that reason, China will most likely continue to deploy similar threat tactics on other perceived swing states, which could include South Korea, Vietnam and some European countries. 

Background

India is expected to launch its 5G spectrum trials in the next few months, ahead of the nationwide rollout of its 5G network planned for 2020. This places New Delhi a bit behind other countries' scheduled 5G rollouts. India's telecom companies have complained that the country's telecom regulator's 5G spectrum band pricing — estimated at $70 million per megahertz — is too expensive, which has raised questions on the commercial viability of the technology. 

India's Ministry of Communications has yet to announce whether it will allow Huawei to join the spectrum trials. Due to concerns that the company's equipment could be used for Chinese surveillance, the Indian government is reportedly considering blocking the use of Huawei equipment in areas near its sensitive border regions with China. 

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