There is no doubt that China will make Britain pay for stripping Huawei from the 5G network. When Beijing said that the reversal “must come at a cost”, it didn’t mean the £2bn bill cited by the culture secretary, Oliver Dowden; and it sees the UK’s stance on Hong Kong as an aggravating factor. The question is how high the price will be, and how precisely the UK will pay.
China’s considerations may include the risk of strengthening a Tory rebellion that could push forward Huawei’s 2027 exit date from the 5G network, and the fact that other countries are looking again at Huawei’s role. The UK is coming into line with other Five Eyes intelligence-sharing nations, the US and Australia, by rejecting Huawei, but could set a new direction in Europe.
Beijing is also fighting on multiple fronts. The imposition of a draconian security law on Hong Kong has caused an international backlash and highlighted other issues, including Beijing’s treatment of Uighurs in Xinjiang and its increasingly harsh line on Taiwan. Its biggest battle is with Washington; on Tuesday, Donald Trump signed an order rescinding Hong Kong’s special economic status with America. China is also struggling with Australia, over Canberra’s calls for an independent inquiry into coronavirus and the offer of permanent residency to some Hongkongers; with Canada, over Huawei; and with India, which has banned dozens of Chinese apps after a deadly border clash. Relations with the EU are becoming more fraught.
But this proliferation of struggles reflects Beijing’s increasing confidence and forcefulness. Britain also looks a good deal weaker than the last time China froze it out, following David Cameron’s meeting with the Dalai Lama. Back then, trade actually increased, and diplomatic relations continued at lower levels. But George Osborne’s subsequent push for a “golden relationship”, with human rights and other concerns low on the agenda as long as the money kept flowing, suggested that the UK will cave whenever it feels the heat. Withdrawal from the EU has left us friendless; and a post-Brexit country weakened by the pandemic will be especially economically vulnerable. The US, despite urging other countries to pick a team, is an utterly inconsistent player.
We can expect more than diplomatic snubs this time. Australia’s example is interesting; it faces a ban on some exports, has hinted that China could be behind a cyber-attack, and recently told its citizens that they could risk arbitrary detention if they travelled to China. British businesses might well find they face new obstacles operating in China: HSBC had reportedly warned Downing Street that it could face reprisals if Huawei was blocked from the UK’s critical infrastructure. That sounded, if anything, rather like a disincentive to keep using the Chinese firm. Why offer further leverage for the future?
But a broader reconsideration is now needed, with countries looking individually and collectively at how we came to the point where Huawei was regarded as almost indispensable for 5G, while China would not allow a foreign firm to play an equivalent role in its essential infrastructure. It might be convenient for the intelligence services to portray this as a failure of industrial policy – as Robert Hannigan, the former director of GCHQ, did on Wednesday – but there is also truth in his charge. It is time to consider what our technological and manufacturing priorities are and should be, where our companies should be concentrating their efforts, and how they can be encouraged and supported to do so.