The front line of the technology war is in Asia. The two superpowers are competing for influence. China is not certain of victory
By The Economist
A technological clash between two superpowers has now become a common occurrence. Recently, the Wall Street Journal reported that US telecommunications networks were breached by a group of Chinese hackers, known as “Salt Typhoon”. The group apparently wanted to gain knowledge about American wiretapping activity. Deep mistrust between the two countries has led to a hostile policy where each has avoided the other’s digital infrastructure. The US government has stopped the Chinese company Huawei from installing its telecommunications equipment in America. China has discouraged the sale of Silicon Valley servers and cloud services within its borders. However, in much of the world, American and Chinese infrastructure (the data centers, submarine cables, and wires that enable the Internet) stand side by side as the two nations compete for market share, profits, and geopolitical influence. The fiercest competition is taking place in Asia.
There, Chinese digital infrastructure firms already have a significant presence. In the past four years, about 18% of all new submarine cables worldwide have been built by a single Chinese company. Alibaba’s cloud operation is active in nine Asian countries, and Huawei has built many mobile networks.
China’s success partly reflects its government plan. The Digital Silk Road Strategy, an initiative of Chinese President Xi Jinping, aims to dominate China’s internet infrastructure in the region. It also helps that Chinese companies are innovative and cheaper than American ones, although some are aided by secret government subsidies. According to one estimate, Chinese cloud services cost as much as 40% less than American ones. If China were to dominate Asia’s digital infrastructure, the consequences would be profound. The ruling Communist Party wants to set the norms governing data and the Internet. China has touted a vision of “data sovereignty,” according to which governments should control data and ensure that it is stored locally so that nothing escapes state ownership.
Moreover, a digital infrastructure dominated by China could make Asian countries vulnerable to the risks of eavesdropping and sabotage. Some governments are oblivious to these risks. But they don’t have to be. Chinese hackers have stolen intelligence from the Philippines in the South China Sea and targeted Malaysia’s Kasawari gas field, which is in waters claimed by China.
When mobile telecommunications networks were being built in the 2000s, two Chinese companies, Huawei and ZTE, beat their American and European rivals in Asia. But this does not mean that Chinese companies will win the battle for digital infrastructure in the future. The investment cycle has started with difficulty. Tech companies will invest just a few tens of billions of dollars each year in data centers in Asia. A study has found that China dominates in cloud computing centers in 5 out of 12 Asian countries, America leads in 5 of them and is neck and neck in two. Some countries, including India, have recently become more wary of the security risk posed by Chinese firms. To emerge victorious, America must focus on three priorities.First, it must be tougher on treaty allies who have become entirely dependent on China, particularly Thailand and the Philippines.
The latter is strengthening military ties with America, even though its digital infrastructure is vulnerable. Some countries, such as Pakistan and Cambodia have surrendered their digital sovereignty to China, thus becoming lost causes.
Second, America should build an Asian alliance for cyber security and Artificial Intelligence. In 2017, Donald Trump abandoned a regional trade agreement, the Trans-Pacific Alliance, which, among other things, would have regulated digital commerce. Revival of this agreement will be impossible, due to the protectionist turn that American policy has taken, but a closer agreement can still be reached with some countries, giving them access to American technology, in exchange for guarantees of protection from Chinese infiltrations.
Third, US intelligence agencies should shed more light on Chinese cyber attacks. Public knowledge of the extent of China’s eavesdropping and hacking is limited. It’s time to raise awareness that China’s cheap digital infrastructure is a problem for America’s influence.
