China’s Digital Power: Impact on the EU

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China’s Digital Power: Impact on the EU

Insights from Tim Rühlig.

China’s Digital Power: Impact on the EU
Credit: Illustration by Catherine Putz

The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Tim Rühlig, a research fellow in the Technology and Global Affairs Program at the German Council on Foreign Relations (DGAP) in Berlin, is the 307th in “The Trans-Pacific View Insight Series.”

Identify the top three takeaways of DGAP’s recent report, “China’s Digital Power: Assessing the Implications for the EU.”

The report consists of seven chapters co-authored by engineers and China scholars and covering a range of technologies and subjects from semiconductors to AI to technical standardization.

One finding across chapters is that while China’s digital capabilities are rapidly rising, the country is not dominant yet. Unquestionably, China has developed into an innovation powerhouse and is central to global supply chains. However, China’s remarkable achievements should not overshadow that – just like any other country – China does not dominate the whole front and continues to depend on foreign technologies. The country aims to tackle this by focusing on strategic and emerging technological niches. China normally does not tackle existing Western strongholds but rather aims to outcompete U.S. and European rivals in fields that are just emerging.

Secondly, we find that the four-dimensional prism we used to analyze challenges arising from China’s growing digital footprint was extremely useful. The four dimensions include an economic, a political, a security, and an ideational angle. Each of these dimensions carry their own challenges from an uneven playing field undermining European competitiveness to political challenges arising from technological lock-in dependencies to network security vulnerabilities and diverging values inscribed in European and Chinese technologies and regulations.

Third and finally, Europe is relatively well-positioned vis-à-vis China when it comes to innovation and research, but too often do we fail in turning innovation into invention. Another weakness is fabrication. We should draw conclusions for proactive policymaking as well as for defensive measures protecting European innovation from this finding.

To what degree is the EU’s reliance on Chinese semiconductors and 5G/6G technology detriment to EU technological competitiveness?

European dependence on Chinese digital technologies varies across sectors. The global semiconductors supply chain is collaborative across countries and regions. The U.S. dominates chip design, and Taiwan fabrication. Testing and packaging are more diversified with an increasing role for China. The EU is weak with the exception of photolithography systems, machinery required for the fabrication of chips. However, China is also not strongly positioned and aims to catch up. Only if Taiwan was controlled by Beijing would the balance tip against the EU and all other Western countries.

In 5G/6G, the picture is much brighter for Europe. Ericsson and Nokia are on eye’s level with Huawei. However, wireless technology, just like semiconductors, relies on complex transnational supply chain and even Ericsson and Nokia purchase from Chinese suppliers. Hence, not even in its stronghold may the EU sit back but needs to proactively steer technological development and prevent dependencies.

How effective are EU countermeasures against Chinese public and digital diplomacy    efforts to undermine EU-U.S. relations?

Chinese information campaigns in Europe are different from Russia’s, as they are more targeted and focus on spreading the Chinese narrative instead of outright fake news undermining democracy more broadly. However, Chinese efforts to influence European public opinion and steer it away from supporting transatlantic relations have increased significantly during the pandemic. The report itself does not assess their effectiveness. But public opinion polls indicate that China’s narratives and image have not yet taken hold across Europe. This should be no reassurance. We need to be prepared that China could learn quickly, not least from Russian disinformation practices.

Explain the strategic relevance of the EU as a technical and regulatory standard-setter vis-à-vis Chinese attempts to dominate global digital governance.

Europe continues to be a global standardization power. It punches far above its economic weight in international technical standardization organizations. The U.S., in contrast, rather spreads its technical standards by means of market power and strong industry consortia.

China is rapidly catching up and has understood the strategic value of technical standardization. It spreads its domestic specifications in international standardization organizations but also as part of infrastructure projects of the Belt and Road Initiative. Most worrisome is not only the ongoing power shift but that China is also questioning the privately driven approaches of the EU and the U.S. to standard-setting. In China, technical standardization is a domain steered by the party-state and so are China’s international activities.

The U.S. and the EU have quite different approaches to technical standardization. This makes cooperation difficult. However, if procedural issues can be put aside, both transatlantic partners could focus on countering the uneven playing field with China, strengthen the role of fundamental values, primarily human rights, in tech standardization, and strive to prevent the bifurcation of technical standards in strategic sectors. The latter is essential to prevent developing countries getting even more locked into Chinese tech.

Assess EU and U.S. policy convergence and divergence in managing China’s digital power projection.

Our report focuses on the EU and does not systematically consider cooperation with the U.S. However, a few conclusions are obvious.

First, in digital tech both common interests but also significant divergences in perspective shape the transatlantic relations. Both sides should find it easy, for example, to agree on the role of human rights protection. However, when we think of big tech regulations, Europeans are primarily concerned with U.S. companies though their Chinese counterparts receive more and more attention.

Second, Europe’s footprint in digital technology is much weaker than that of the U.S. On the one hand, this requires Europe to seek cooperation, primarily with democracies. On the other hand, Europeans find it even more difficult to decouple from Chinese technology supply chains. The challenges both sides face are not the same.

Third and finally, China is very clear about what it aims to achieve with its digital tech stronghold. Digital technology is supposed to strengthen the party-state from generating prosperity and social stability to perfecting digital authoritarianism and projecting Chinese power. Europe and the United States lack such a clear vision. This should be a valuable starting point to collectively think about a broad strategic vision alongside more narrow policies targeting specific concerns and vulnerabilities.