GUANGZHOU -- On Aug. 23, Lu Kang, a spokesman for China's Foreign Ministry, in a daily briefing urged the Australian government to "abandon ideological prejudices and provide a fair competitive environment for Chinese companies doing business in Australia."
The remarks came in response to Canberra's decision the same day to ban Huawei Technologies and ZTE from supplying equipment for fifth-generation mobile networks in Australia. The move likely came as a shock to Beijing, which has ambitions to dominate the global telecom market.
The U.S., a close ally of Australia, was probably relieved. The question for China is whether more Western markets follow Canberra's lead.
The new 5G technology promises data transmission speeds 100 times faster than the current generation of mobile networks, allowing users to enjoy faster downloads and video streaming on their smartphones. But perhaps the most important applications for 5G will be in self-driving cars, the internet of things and other emerging technologies for which ultra high-speed communication is crucial.
This is driving telecom carriers around the world to pour money into 5G, to the tune of $10 billion per project, mainly to build infrastructure such as towers and base stations.
Commercialization of 5G mobile networks is expected to be in full swing by the latter half of next year. As governments around the world conduct trial runs of the technology, Canberra has shut out the Chinese operators, citing security concerns. Huawei controls more than half the Australian market in 4G equipment. The government's decision to bar Chinese companies from the 5G market underscores the depth of its worries.
The U.S. is thought to have pushed Australia to block the entry of Chinese 5G equipment suppliers. Japan, on the other hand, may have mixed feelings.
Seiko Noda, Japan's internal affairs and communications minister, and Miao Wei, China's minister of industry and information technology, met in May and said they would promote collaboration between Japanese and Chinese companies on next-generation network technology.
Japan's SoftBank Group is already doing so. It is testing 5G in Japan, together with Huawei. ZTE supplies network gear to Japanese mobile operators NTT Docomo, KDDI and SoftBank. Chinese manufacturers are hoping to use the transition from 4G to 5G to become bigger players in Japan.
Further complicating matters is the dearth of 5G equipment suppliers worldwide. Countries rolling out 4G or 5G have only a handful of suppliers to choose from, including Cisco Systems of the U.S., Sweden's Ericsson, Nokia of Finland, and Huawei or ZTE from China.
Governments and companies on tight budgets "have few options other than to choose overwhelmingly cheap Chinese products," according to one industry insider.
Huawei, in particular, "has drastically cut its development expenses by precisely copying the products of its rival, Cisco," according to a senior manager with a Japanese telecom company. That has enabled the Chinese company to offer unbeatable prices and quickly expand around the world.
Japan's Chief Cabinet Secretary Yoshihide Suga has complained that telecom operators charge too much to mobile customers and called for lower monthly fees. Shutting out Chinese suppliers would leave Japanese consumers with fewer choices, and probably higher prices.
Australia has come to the conclusion that the lower costs Chinese manufacturers offer are not worth the risk of data leaks. It is not alone. In addition to the U.S., the U.K., Russia and others also restrict the sale of Chinese telecom equipment.
As the outlook for their exporters darkens, the Global Times, an English-language paper backed by the Chinese Communist Party, published an article in late August saying the Australian ban would not necessarily "cause a domino effect in Western countries." Ironically, this hints at Beijing's nervousness about such an outcome.
