Features | Economy | East Asia

China’s Digital Silk Road Grows With 5G in the Middle East

Huawei and other Chinese firms continue to make rapid inroads among Gulf countries – despite the United States’ efforts.

By Sophie Zinser for
China’s Digital Silk Road Grows With 5G in the Middle East

In this Oct. 14, 2020, file photo, a man wearing a face mask to protect against the coronavirus walks past a billboard advertising Chinese technology firm Huawei at the PT Expo in Beijing.

Credit: AP Photo/Mark Schiefelbein, File

“New Value Together” was the slogan for the 40th annual GITEX Technology Week, the only in-person global technology show of 2020 held December 6 to 10 at the Dubai World Trade Center. Its organizer is known across the Middle East – particularly the GCC countries – as the region’s leader in 5G and cloud computing: Huawei.

The global telecoms supplier and mobile phone manufacturer made headlines throughout 2020 – most recently in Southeast Asia with a blitz of deals monopolizing Indonesia’s 5G network – for its role in a growing global 5G movement. Eleven telecom firms including those in the Gulf Cooperation countries (GCC) of the UAE, Saudi Arabia, Bahrain, Kuwait, and Oman have signed massive 5G contracts with Huawei over the last year.

By 2025, GCC countries will house much of the world’s growing 5G subscribers. Huawei has jumped on the bandwagon to capitalize on what they perceive as a promising future for 5G in the Middle East. The company’s leadership has been bullish on the Middle East since September 2019. And the region’s $164 billion annual market for information and communication technology (ICT) products is a good reason for Huawei’s enthusiasm. Over the last year, there has been a surge in publicly administered cloud services in the Gulf worth nearly $3 billion. This Gulf government-led push is confirming for Huawei that 5G-enabled cloud computing in the GCC is an increasingly lucrative market.

But what impact has this recent growth in 5G had on the everyday lives of the 54 million people living in the GCC? Not much. Locally, 5G is mostly being implemented widely only insofar as to enable a more rapid pace of downloads to smartphones and quicker analog communications. As of December 1, Huawei’s new P40 PRO 5G phone is available for consumer purchase in the UAE. But analysts remain optimistic on the potential of 5G to positively impact multiple industries in the GCC, specifically energy usage optimization, cloud computing, ultrafast broadband, and internet of things (IoT) innovation, including self-driving cars, transportation, and factory equipment.

In response, Huawei has been relentlessly extending its digital footprint across the Middle East despite Western efforts to curtail its global expansion. The United States has repeatedly expressed security concerns over Huawei’s presence in international markets. Since 2018, U.S. policymakers have been actively attempting to hinder the company and its China-side competitor ZTE’s expansion abroad, especially within the European Union. The Trump administration’s pressure on Huawei – specifically its recent ploy to curb critical semiconductor technology sales to the Chinese company – has sparked global discussions about data privacy and security-related drawbacks to international reliance on Huawei’s toolkit.

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While the U.S. government’s efforts to halt Huawei’s expansion have succeeded domestically and in parts of Europe, the Gulf market has come out unscathed. This is perhaps due to the region’s highly sensitive position in geopolitics. Given a heavy reliance on China’s oil market as well as the significant U.S. military and diplomatic presence, there is no incentive for Gulf economies to become a proxy war zone for the world’s two largest superpowers.

But COVID-19 has made Gulf economies increasingly reliant on China as the nation’s economy recovers faster than the United States’ from the global recession. Since COVID-19 restrictions lifted in China, Chinese policymakers have undertaken major steps to develop what they are calling “industrial internet” of global telecommunications providers at far cheaper prices than their Western competitors in the sector. Saudi Telecom Company (STC) reported a jump of over 1,000 percent in bandwidth due to the surge in remote education. They are currently scrambling to secure necessary network infrastructure to keep pace with the demands of Saudi’s ambitious Vision 2030 strategy. Similarly, Qatar is preparing to host in 2022 what it hopes will be the first 5G World Cup. The event’s reliance on a critical partnership between British telecom giant Vodafone and Huawei may be jilted from the U.K.’s recent ban on Huawei products, making the battle for 5G in the region over the next few years ever more relevant.

Huawei’s aforementioned growth in global 5G has occupied much of the 2020 conversation on Chinese companies comprising China’s Digital Silk Road (DSR) initiative. The phrase DSR was initially launched in a government white paper in 2015 as an extension of China’s Belt and Road Initiative (BRI), a global strategy for Chinese-led infrastructure development. Now the DSR is a widely used moniker for Chinese data and telecoms activity abroad. According to Fudan University, the DSR policy itself is comprised of five key aspects: with infrastructure at its core, the DSR relies on expanding influence to trade, finance, and “people’s hearts,” all geared toward shaping policies abroad. These include cybersecurity, digital governance, and data sharing practices across the developing world.

Both the BRI and DSR act in practice as catch-all monikers for economic and policy decisions that Chinese government actors and corporations make. The ambiguity of DSR’s branding makes potentially disparate policies across many Chinese companies – each with varying levels of Chinese government involvement – look cohesive. Even within those companies China’s hybridized structure of state-owned and private enterprises makes top-level decision-making incentives difficult for outsiders to disentangle.

No single company or government entity is totally emblematic of China’s DSR, even Huawei. But U.S. 5G operations are still lagging behind that of Asia in the Middle East. The Japan Center for Economic Research predicts that given its performance in light of COVID-19, the Chinese economy will surpass that of the United States before 2030. With rollout of 5G in the U.S. lagging in pace behind that of Asia, Huawei and its peer companies’ current moves into Middle Eastern markets could chart a course for Asian dominance in the region’s future.

Multinational coordination efforts – such as the digital infrastructure partnership launched last year between the EU and Japan – are a positive strategy for the U.S. government’s competition to stay relevant on 5G. Republican Chairman of the U.S. Senate’s Foreign Relations Committee Jim Risch recently released a report hoping to form a transatlantic partnership between the EU and U.S., citing concerns over the vast capacity for Chinese controlled firms to support data storage. Just like Huawei’s “New Value Together” slogan in the Middle East, cooperation strategies may help the West stay relevant and bring increasingly competitive value to the Middle Eastern ICT market.

Sophie Zinser is a researcher focusing on China’s role in the Middle East, South and Central Asia.