Backgrounders February 8, 2023

DIGITAL SILK ROAD

by Rahul Karan Reddy

Beijing's Digital Footprint and its Political Implications

Summary

The Digital Silk Road (DSR) is part of the Belt and Road Initiative (BRI) that finances and supports digital connectivity infrastructure to support China's technology companies, goods and services. The initiative includes the provision of hard infrastructure like cellular networks and soft infrastructure like applications and mobile payment platforms to facilitate China's trade with developing countries. The DSR is also a nexus between the state and tech companies to establish China as the primary supplier of technology goods. The initiative is backed by policy banks and receives political support from the government to penetrate and dominate emerging markets in Africa, Asia and Latin America. The objective is to deepen China's commercial and geo-economic interests, create favourable norms and standards governing technology, cultivate political leverage with foreign governments and sustain the development of China's domestic economy and military industrial complex. The DSR represents China's commitment to technological competition with the US, posing several challenges to a rules-based international order, democratic norms and civil liberties.

 
 

Origin

The Digital Silk Road was conceived in a white paper released by the State Council in March 2015 on the subject of “Internet +”. The document mentioned the term ‘Information Silk Road’ and noted that, “We (China) should jointly advance the construction of cross-border optical cables and other communications trunk line networks, improve international communications connectivity, and create an Information Silk Road”. Although digital infrastructure projects were already underway since the early 2010s, the white paper was the earliest articulation of the branding for the DSR. The emphasis on multi- dimensional connectivity was reiterated in a white paper on BRI released by the National Development and Reform Commission (NDRC) in 2015 that stated, “(BRI) aims to promote the connectivity of Asian, European and African continents and their adjacent seas, set up all-dimensional, multi-tiered and composite connectivity networks”. Chapter 26 of the 13th Five Year Plan for Economic and Social Development in 2016 called for the implementation of Internet+ projects and the initiation of pilot projects to develop a modern internet industry system.

At the National Congress of the China Association for Science (CAS) in 2016, China’s President Xi Jinping stated the central objective of the DSR: for China to become the leading player in science and technology globally by 2030. The State Council followed up with the 13th Five Year Plan for National Informatisation, calling for the construction of an online silk road and planning a bundle of digital connectivity projects from Guangxi in southern China to ASEAN countries.

The momentum for developing digital connectivity abroad was generated by emphasising the policy at various international forums. The DSR was promoted at the 4th World Internet Conference, 8th China-Arab States Cooperation Meeting and the 1st BRI Forum in May 2017, where President Xi Jinping called for the integration of network technologies into the BRI. The DSR has also been successful in attracting private multinational companies to participate in the initiative. For instance, in late 2017, Chinese server company and the only commercial entity with representation on the Central Committee (CC) of the Communist Party of China (CPC), INSPUR Group, with other tech companies like IBM, Cisco and Ericsson launched the BRI Digital Economy Strategic Alliance in Shandong with support from policy banks like the Exim Bank and China Development Bank. The alliance proposed to integrate digital technologies into BRI projects in South Asia and Africa first and later expand them to other BRI countries. The DSR was highlighted at the Second BRI Forum in 2019 as well, drawing immense attention to the initiative when China held a sub-forum on the DSR. At the Forum, Xi stated that China must keep “keep up with the trend of the Fourth Industrial Revolution” and build “the digital Silk Road and the Silk Road of innovation”. In 2020, China organised the 7th World Internet Conference to display the technological edge of Chinese enterprises like Alibaba, Tencent, Huawei, Baidu and 130 others, projecting its capacity for developing and supplying technology goods. Besides exporting digital economy goods like cellular infrastructure and undersea internet cables, the DSR has established several avenues for international exchanges and cooperation on the digital economy. For instance, the BRI Science, Technology and Innovation Cooperation Plan launched in 2017 facilitates cooperation on projects like joint laboratories, technology transfers and people-to-people exchanges. By 2021, China established science and technology cooperation with 84 BRI countries, invested 2.99 billion RMB, established 1,118 joint research projects and set up 53 joint laboratories. China’s DSR initiative has taken on greater significance following the outbreak of the COVID-19 pandemic which has compounded the demand for low-cost digital infrastructure. Momentum for digital connectivity initiatives continues to grow on the back of demand for digital technologies that can integrate into all aspects of the economy in emerging markets of Asia, Africa and Latin America.

Aspects

The key aspects of the DSR Initiative were outlined in 2018 by Fudan University’s Digital Belt and Road Centre in a document titled DSR Bluebook. The document identifies five areas of application for core DSR technologies: infrastructure, trade, finance, people’s hearts and policy. Core DSR technologies include telecommunications infrastructure, internet cables, data centers, cloud services, OTT (Over-the- Top) platforms and consumer electronics. These technologies encompass most sectors of the digital economy, from cellular networks and internet cables necessary to support internet access to mobile phones and applications that provide access to video games, mobile payments and e-commerce platforms. Together, the bundle of technology goods and services is sometimes referred to as the tech stack: hard and soft infrastructure that enables users to access technology services like mobile payments and e-commerce through goods like mobile phones and internet cables. The table below (Table 1) details China’s extensive presence in Africa’s digital economy.

Table 1: China’s Presence in Af rica’s Digital Economy

China is also keen to set global technology standards. This is emphasised in the Key Points in the Work of National Standardisation released in 2020 that promoted standard setting in advanced manufacturing and next generation technologies, encouraged participation in international standards organisations and promoted Chinese standards through channels in the BRI and BRICS forums. The National Standardization Development Outline released by the State Council in 2021 has set specific indicators for improvement in China’s standard levels and emphasised greater exchange and cooperation via multilateral fora and standards organisations.

Objectives

The BRI and DSR are ambitious and rebranded versions of the Going Out/Going Global policy of the early 2000s that started the internationalisation of Chinese enterprises. As a result, the Going Global policy and DSR have some common objectives, but also differ in other respects.

1. Self-reliance in core technologies

The emphasis on self-reliance in core technologies comes from the highest levels of the CPC, keen to sustain the development of technologies that determine the outcome of US-China strategic competition. The DSR was initiated to provide financial and political support for enterprises that enable China to become self-reliant in core technologies vital for the continued growth of its domestic economy and military. China’s rising economic and military power, combined with its assertive foreign policy has constrained its ability to access technologies in advanced industrial economies like the US, EU, Japan and South Korea through technology transfers, mergers and joint ventures. As countries gradually restrict Chinese companies from participating in economic activity in advanced economies through export controls and other measures, self-reliance has emerged as a central objective of the DSR.

2. Creating a market ecosystem in which Chinese technologies and content platforms are dominant

The DSR is designed to facilitate China’s ambition to build and operate financial and economic infrastructure outside the control of the US. Driven by this strategic objective, the DSR supports the creation of a market ecosystem in which Chinese tech companies are dominant in providing goods and services necessary for access to the digital economy. The DSRs objectives are geo-economic and commercial: to increase the market share of Chinese tech companies in overseas markets, deepen trade and connectivity with China and promote development norms and social perceptions that normalise China’s outsized presence in the everyday lives of consumers in overseas markets.

3. Promote technology norms and standards favourable to China

A major strategic objective of the DSR is to actively shape and promote standards and norms that govern the functioning of digital infrastructure. The Plan for the Development of the National Standardization System Construction announced in December 2015 by the State Council emphasised that China should employ its financial clout and staff in international standards organisations to influence the policies and rules for international standards. Through a variety of tactics in multilateral fora and aggressive promotion of its digital economy goods through the DSR and BRI, Beijing is keen to ensure that norms and rules governing the internet and digital economy are favourable to China’s interests. For instance, China’s foreign aid law of 2008 stated that recipients of Chinese foreign aid need to adopt Chinese standards to qualify for aid. By 2017, China already signed agreements with 28 countries to improve standards conformance and promote trade. China has made several attempts to change the current internet architecture, most notably through Huawei’s New Internet Protocol proposal at the International Telecommunications Union (ITU).

4. Create national champions in tech sectors that are extensions of China’s economic and strategic interests

The DSR permits Chinese tech companies to act as extensions of the Chinese government in overseas markets. The expansion of companies like Baidu, Alibaba and Tencent (BAT) into global markets favours China given the significant influence exerted by the Chinese government on its tech companies. For example, China’s new Data Security Law of 2021 that governs the transmission, use, processing and disclosure of data within China also applies to Chinese companies operating overseas. The law states that network operators should accept supervision from the government and international data transfers include those that the Cyberspace Administration of China (CAC) determines as such, at its discretion.

China’s Digital Footprint

The DSR has already resulted in agreements between China and 16 countries, and by 2018-19, Chinese companies implemented 1,324 overseas projects with 57% of projects associated with the DSR. The number of DSR projects per year has increased since 2015 (105). By 2019, the number was 355 and in 2020 it was 245. In 2015, DSR projects mainly focused on pre-5G telecommunications infrastructure, surveillance technology and technology transfer projects. By 2020,
projects mainly took the form of data centers, surveillance technology, 5G, terrestrial and internet cables, fintech platforms and academic programs. The DSR has massively expanded China’s digital footprint in markets in Africa, Asia and Latin America, where Chinese tech companies are major players if not market leaders. Take the case of Africa, where Chinese tech companies dominate several sectors of the digital economy in the world’s fastest growing middle class.

Most sectors of the digital economy in Africa are dominated by Chinese tech companies. In every segment of Africa’s digital economy, from telecom infrastructure to fintech platforms, Chinese tech companies have secured large market shares across the continent. Huawei equipment accounts for nearly 70% of 4G infrastructure in Africa and it was the first company to offer 5G services on the continent. The PEACE submarine cable, built by Hengtong, offers internet connectivity to countries in the region while the 2Africa cable, scheduled for completion in 2024 involves China Mobile as a partner in the project. In the smartphone and handset segment, a Chinese company called Transsion has captured 48% of the smartphone market and 64% of the feature phone market. Chinese tech companies have also been successful in offering mobile apps and platforms. Mobile applications like Boomplay and Vskit are major players in Africa’s social media ecosystem. Mobile money wallets and platforms like OPay and Palmpay, backed by Chinese investors and tech companies, are major players in the fintech sector. Chinese tech companies are partnering with local players to offer super apps and digital media experiences like those available in China.

Tech companies heavily involved in the DSR are also able to secure contracts from African governments. Huawei alone is involved in 25 data centre and e- governance projects across Africa and AI surveillance systems developed by Chinese companies are deployed in 13 African countries so far. SafeCity and SmartCity projects in Africa rely on surveillance equipment made by Chinese companies like Hikvision and CloudWalk. Most worryingly, Chinese technology equips several government buildings in Africa: 24 presidential residences or offices, 26 parliamentary offices, 32 police or military installations and 19 Ministry of Foreign Affairs buildings.

Conclusion

The DSR has encouraged China’s technology companies to expand their economic and commercial interests in emerging markets across Africa, Asia and Latin America. It has supported China’s efforts to become self-sufficient in core technologies, establish its enterprises as dominant market leaders and influence norms governing the digital economy. It has also allowed Beijing to cultivate significant political influence and goodwill in these regions. China’s expanding influence in the form of embeds in the government sector and consumer economy has several pressing implications for countries participating in the DSR. Chinese technology and equipment has been deployed by some African governments to spy on political opponents, silence critics, expand the surveillance of citizens and clamp down on civil liberties. Additionally, Chinese tech companies train governmental officials in the use of technologies that replicate China’s surveillance practices. The proliferation of authoritarian norms via Chinese technology presents a serious risk to democratic states and civil societies. The growing demand for digital economy goods and expanding influence of China’s tech companies supported by the DSR has ensured that regions like Africa will remain a stable market for the export of Chinese technology and norms.

The DSR will play an increasingly important role in representing the BRI and China’s national interests, especially as smaller projects are favoured over large- scale infrastructure projects. The emphasis on science and technology, innovation and high-technology manufacturing by the CPC in China also provides the DSR with the requisite momentum to enter more emerging markets around the world, where demand for digital infrastructure is set to increase. Countries in regions like South Asia, Central Asia and Latin America are likely to witness greater participation of Chinese tech companies in their respective digital economies. They will have to confront the diffusion of norms and practices that could damage democratic political systems and encourage authoritarian political behaviour. China’s extensive presence in the digital economy of these countries also raises concerns about the manipulation of public opinion, data theft and other criminal activity. Demand for digital infrastructure in developing countries requires India, Japan and other like-minded countries to provide technology goods under a sustainable and transparent framework that competes with the DSR.

Front page image source: Wu Bingfeng via 123rf (https://merics.org/en/short-analysis/digital-silk-road- development-issue)

Author

Rahul Karan Reddy is an international relations analyst with a Masters degree from O.P Jindal Global University in Diplomacy, Law and Business. He is the author of ‘Islands on the Rocks’, a monograph detailing the Senkaku/Diaoyu island dispute between China and Japan. His research focus is China and East Asia. He was a research analyst at the Chennai Center for China Studies (C3S) and an intern at the Institute for Peace and Conflict Studies (IPCS), writing articles and reports on China’s foreign policy and domestic politics. His blog, Asian Drama, follows the rise of India and China as they navigate the Asian Century. He can be reached on rahulkaran.reddy@gmail.com

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