EU Companies Want China’s Digital Offerings Like Blockchain, 5G Restricted

Members of the group that acts as a common voice for the various business sectors of the European Union and European businesses operating in China are not happy. They have called for China’s emerging ‘Digital Silk Road’ (or DSR) to “be much more open to input from all stakeholders” or should see EU countries tighten reciprocity in the digital sphere against China.

The call by the European Union Chamber of Commerce in China (or European Chamber) as contained in their The Road Less Travelled: European Involvement in China’s Belt and Road Initiative (BRI) report is based on their view that China “has developed tools to protect its own companies and not only block access to China’s market, but also restrict interoperability between foreign and local digital goods and services”. This supposedly hinders truly global digital connectivity and full interoperability between different systems.

“China has largely withheld necessary licences from foreign companies in its own market that are eager to offer digital goods and services like blockchain, cloud and 5G, putting Chinese ICT companies at a massive advantage,” their report states, “European companies operating in China have witnessed patterns in critical areas—like the application of ICT standards for services such as blockchain, cloud and 5G—that raise serious concerns about how China may use the DSR to ‘export’ its digital practices to other markets.”

The Chamber highlights two key issues in the report that are problematic to their interest: the closed nature of digital standards in China; and a lack of system/product interoperability, coupled with China’s excessively tight regulation of digital goods and services. These raise concerns as “Chinese digital goods and services will increasingly be operational everywhere, whereas foreign solutions will be restricted to everywhere outside of China.”

It may also be responsible for the low participation of European companies in the BRI, the Chamber notes. Based on a member survey and extensive interviews, there is a lack of European involvement in China’s BRI – only 20 of 132 survey respondents report having bid on a BRI-related project. This is due to huge challenges to participation for European companies operating in China and even greater in the ICT sector.

The DSR, which one European executive describes as “the largest deployment of digital infrastructure that the world has ever seen” is a vital component of the BRI. As the Initiative spreads its extensive digital infrastructure projects in many BRI countries using technology standards set by China, it worries the Chamber that “standard-setting committees in China responsible for technology that will define future decades of economic development, such as blockchain, artificial intelligence and cloud, are much less welcoming to European participation.”

It adds that the Chinese Government is prepared to leverage access to the Chinese market as a tool to provide an advantage to their own champions on the DSR. A cited example is the market access restrictions imposed on foreign companies providing value-added telecoms services which cover emerging technology like blockchain, cloud and virtual private network services.

“These restrictions include outright equity caps as well as onerous and opaque demands for licensing approvals,” the European Chamber states, adding that European firms have noted that their Chinese competitors have no problem obtaining such approvals though they get rejected repeatedly. “Meanwhile, those same Chinese competitors can easily obtain comparable approvals in Europe (if they are even required in the first place). This creates a situation in which Chinese digital solutions can operate globally, while European ones can operate globally, less China.”

It recommends that the EU should institute full reciprocity for connectivity projects, opening bids only to enterprises from countries that offer corresponding terms for their own, similar projects or develop a mechanism similar to the International Procurement Instrument focused on ensuring reciprocity in the digital economy.

“Such a mechanism could collect formal complaints from companies trying and failing to, for example, obtain the necessary blockchain or cloud licences in China necessary for interoperability with the Chinese system,” it states. “In the event that these claims are adjudicated to be genuine, the mechanism could then impose varying kinds of sanctions or restrictions on Chinese companies trying to do the same in the EU.”

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