10 Special reportChina’s Belt and Road The EconomistFebruary 8th 2020
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ne tropicalevening in November, the 9,800-tonne Ile de Bré-
hat slipped from the quay at Honiara, capital of the Solomon
Islands, and steamed out of Iron Bottom Sound. For weeks the boat
had been a familiar sight as it finished its job of laying 4,700km of
fibre-optic cable from Sydney to Honiara on Guadalcanal and
730km among the main outlying islands, with another branch
heading to Port Moresby, capital of neighbouring Papua New Guin-
ea. Less than a fifth of Solomon Islanders have access to the inter-
net. The Ile de Bréhatis about to transform more lives than any ship
since the Los Reyes, the first European vessel to discover the is-
lands, in 1567.
Two-thirds of the $93m cost of the Coral Sea Cable System was
borne by the Australian government. It got wind that China was
proposing to do the job, led by Huawei, China’s telecoms giant.
Australian intelligence types view Huawei as a national-security
concern. Australia is also the biggest donor to Pacific Island na-
tions and is used to being top dog in its backyard. It told leaders in
Honiara and Port Moresby that Huawei was not to be considered.
Yet Australia has taken its eye off the Pacific in recent years, as
China has stolen a march. Two-way trade with the Pacific has
grown tenfold, from under $1bn in 2005 to over $8bn in 2018. Chi-
nese tourists to the region jumped from under 4,000 a year a de-
cade ago to more than 140,000 in 2017. China’s leaders extol the po-
tential for brico-operation with Pacific nations. A “new Pacific
diplomacy” has gathered pace since President Xi Jinping made his
first trip to the region in late 2014. Pacific Island leaders frequently
head for China.
When Australia’s security establishment woke up to the grow-
ing Chinese presence, it did so with alarm. Australia had its way
over Huawei. But just weeks before the Ile de Bréhatdeparted (and
days before the 70th anniversary of the founding of the People’s
Republic of China), the new Solomon Islands government
switched diplomatic allegiance from Taiwan to China—as, too, did
the atoll nation of Kiribati. The switch was accomplished with of-
fers of bribes to mps and, according to Graeme Smith, of the Austra-
lian National University, a $500m package of loans and grants
dangled by a Chinese state enterprise before the prime minister.
Huawei’s loss, in other words, is just one battle in a larger con-
test. Increasingly, the digital Silk Road, which Mr Xi declared at the
second bri forum last year to be a priority for co-operation, is gain-
ing prominence. China, he says, must become a “cyber super-
power”. That is fast becoming the most controversial aspect of the
britoo, as security concerns in the West grow over Huawei’s provi-
sion of fibre-optic cables and 5gnetworks.
Digital spending along the belt and road still lags that on energy
and other hard-infrastructure projects. But, as the Mercator Insti-
tute for China Studies in Berlin points out, it is growing fast. The
institute has tracked at least $7bn in loans and investment in ca-
bles and telecoms networks, over $10bn on e-commerce, mobile
payments systems and the like, and more on research and data
centres. The digital dimension has expanded hugely from an ini-
tial focus on fibre-optic cables to cloud computing, big data and
“smart city” projects.
The approach, both with top-down guidance and bottom-up
buccaneering, resembles the rest of the bri (not least in the vague-ness of the Silk Road terminology used). Most of China’s tech
giants, such as Huawei, Alibaba and Tencent, are private firms and
are more entrepreneurial than the state behemoths. But close
links to the Communist Party and powerful financial incentives
keep their activities aligned with state priorities—and help them
to become global champions. Chinese banks provide funding, as
they do to more traditional infrastructure companies. It was a con-
cessionary loan that allowed Huawei to lay a 6,000km fibre-optic
cable across the Atlantic, between Brazil and Cameroon.
For China, it is not just a question of fostering world-beaters in
high-tech. It also wants to encourage the wider adoption of home-
grown cyber norms and standards. For instance, fintech brands
like WeChat Pay and Alipay can help to internationalise the yuan
and establish cross-border payments infrastructure to compete
with swift, the American-led system which currently dominates.
Undersea cables and cloud computing could provide user data
around the world, boosting China’s efforts to surpass America in
artificial intelligence.
While cheaper telecoms and easier ways to pay are welcome,
China’s digital initiatives concern those who care about open soci-
eties. First, along with Chinese standards some countries are also
signing up to its digital authoritarianism. In setting up telecoms
systems, Huawei and others happily help states snoop on commu-
nications. Without its citizens’ consent, Zimbabwe supplies data
to China’s facial-recognition programmes. That is one reason to
predict that rivalry over briwill in future play out more in the digi-
tal realm than in the world of concrete. A second is that, in tech, a
small handful of huge firms dominate. The next 4bn internet users
are a huge prize, one which China thinks it has a shot at winning.Thefuturestage
Digital dimensions are gaining prominenceThe digital Silk Road