China's National Interest & The Rise Of

Huawei

By: Jason Shanaka Daniel(101231830)

Ryan Bunsu Anak Bell Aggan (100080303)
How did China develop – what was its industrial plan? Is it different
from that of Singapore?

China’s rapid development is due to its solid industrial plan to achieve more sustained economic
growth. For example, China decided that they wanted to increase domestic savings which is the
same type of idea & plan that Singapore is using. Steps like these are exceedingly difficult but
necessary. In less wealthy countries, savings are vital when trying to achieve a steady
development in the economy. In the beginning, around the year 1950, China initiated efforts to
gather all their capital via their national savings. Although they are a poor country, China has
never seen its domestic saving rate fall under 20% of GDP up until the year 1978. In the
following years, their domestic savings rate mostly continued to increase until it finally reached
its peak in the year 2008 (52% GDP). Any nation that wants to properly utilize national savings
must be able to create a manufacturing capacity of its own. Singaporean founding leader, Mr.
Lee Kuan Yew, once said that a nation is not equipped to be a major player in the economy if
they are unable to establish themselves as an industrial power first (Suryanarayan 2021).

However, developing a manufacturing capacity is not easy for a country and for China; it began
with “dirty labor” such as intense export jobs. At the same time, entrepreneurship is also heavily
encouraged. Thus, they now have the world’s best production network and a substantial number
of global entrepreneurs. For instance, now there is a famous Chinese company called Huawei
which happens to be one of the country’s top manufacturers of smartphones. Huawei’s secret to
success stems from its internationalization strategy of operating in countries with
underdeveloped economies and then continuing to enter the more advanced economy of Western
nations (Wang 2019). Due to China’s rapid economic development, plenty of companies from
China have delved into the international market of the technology industry and are doing very
well.

How does China's national interest affect the IBS of China firms
(such as Huawei)/foreign firms
Ren Zhengfei, the one who founded Huawei and was previously a People’s Liberation Army
member, implemented a business style that was heavily influenced by Maoism. Ren knew how
crucial information technology (IT) was and spotted the significant difference in IT development
between companies from China and Western countries (Bowler 2020). Hence, with support from
the local government and favoured in terms of research & development grants, finances, and
credit; Huawei has managed to win big contracts in China to work on IT development. In other
words, government intervention is one of Huawei’s main keys to success, especially in the start-
up phase. Without it, it would be tough to compete with other companies domestically.

Nonetheless, this partnership with the local government has become a huge concern and raised
suspicions among the other countries. Particularly, the Western countries, which feel like the
nation’s security, will be at risk if they allow Huawei and other Chinese companies to operate on
their home turf. China’s national interest has caused the creation of a hidden barrier among these
nations and has consequently made it extremely difficult for Huawei to attempt business
expansions in nations such as India, the United States of America, Australia, as well as Canada
over the years (Kwan 2021). Other Chinese high-tech companies like Lenovo and ZTE are also
banned from those countries along with Huawei. As previously mentioned, the main reason for
these bans is due to the integrity and reliability of the software and hardware, which is a huge
issue in the security of IT.
Is the Trump administration’s “tech war” with China to prevent
Huawei from becoming the dominant supplier of 5G systems to the
world?

With its long history in research and development and Invention, The US has been the global
tech giant for the past few decades. However, Beijing’s ‘Made In China 2025’ Blueprint has
challenged that long-held position as the Chinese government throws billions of dollars of state
funding into Chinese tech companies to develop new technology. The Chinese tech company
Huawei is one such Chinese tech giant currently at the forefront of developing global 5G
networks. During Donald Trump’s administration, the USA imposed trade tariffs of 25% on
Chinese imports on the basis of ‘rebalancing’ America’s trade deficit with China, which
ultimately led to Trade tensions between the two economic giants. However, a series of unrelated
events, such as accusations of intellectual property theft and espionage by Chinese companies,
led to a ‘ tech war’, which overshadowed the trade war between the two countries (SCMP 2021).
As a result of this tech war, Tech companies like Huawei were blacklisted from doing business
in the US. Companies such as Google no longer allowed Huawei to use their applications on
their products.
Although the US claims that Huawei was banned for security reasons, many analysts argue that
the ban was political. As was the case with Manufacturing goods, Beijing backed tech companies
such as Huawei has grown rapidly in the tech industry over the past few decades, posing a threat
to the US dominance. Political scientist Graham Allison describes US-China rivalry as a
‘Thucydides Trap’ where an established power sees its dominance threatened by an emerging
power (Canal et al. 2020). Therefore, it is safe to assume that Trump’s ban on Huawei aimed to
stop the company from achieving global dominance in the 5G industry.
Huawei’s future in the context of current global scenarios
concerning the national interest of China and other nations?

Despite Huawei being registered as a private company, it is no secret that the Shenzhen based
tech giant has played a significant role in contributing to China’s National interest. These close
ties with Beijing have raised concerns regarding national security with the International
community resulting in countries banning or imposing restrictions on Huawei products (Hosian
2019). These controversies surrounding Huawei has impacted the company’s profit as the
company experienced the lowest revenue growth rate in a decade. Furthermore, the company
tumbled down the rankings of Global smartphone brands during 2020 (SCMP 2021).

Despite all the pressures from the International community, analysts believe that Huawei’s price
advantage and large consumer base will help the company stay afloat. Furthermore, Huawei’s
rapid development of its own operating system ‘Harmony OS’ shows that the company is ready
to continue its operations if it loses access to Google’s Android system (Hosain 2019). Although
there are no current global scenarios that would immediately sink the tech giant, there is a
possibility that in the future, China’s National interest would haunt their future international
operations. However, the company is revered in its home country that it could survive for
decades as a China-only brand.
References
Bowler, T 2020, Huawei: Why is it being banned from the UK's 5G network? , BBC, viewed
March 2022, <https://www.bbc.com/news/newsbeat-47041341>.

Canals, C & Singla, J 2020, ‘The US-China technology conflict: an initial insight’,
INTERNATIONAL ECONOMY, November 2020, p p. 15-16

Hosain, S 2019, ‘Huawei ban in the US: Projected consequences for international trade ’,
International Journal of Commerce and Economics.

Kwan, C 2021, US President Biden signs law to ban Huawei and ZTE from receiving FCC
licences, ZDNet, viewed March 2022, <https://www.zdnet.com/article/us-president-biden-signs-
law-to-ban-huawei-and-zte-from-receiving-fcc-licences/>.

Morrison, W 2013, ‘China's economic rise: history, trends, challenges, and implications for the
United States’ ,Washington, DC: Congressional Research Service, (pp. 20-22).

SCMP 2021, Everything you need to know about the US-China tech war, viewed 24 March
2022, <https://www.scmp.com/tech/tech-war/article/3130587/us-china-tech-war-everything-you-
need-know-about-us-china-tech-war>.

Sun, H 2019,’ US-China tech war: Impacts and prospects’, China Quarterly of International
Strategic Studies, 5(02), pp.197-212.

Suryanarayan, V 2021, Lee Kuan Yew and China’s transformation, The New Indian Express,
viewed March 2022, <https://www.newindianexpress.com/opinions/2021/jul/31/lee-kuan-yew-
and-chinas-transformation-2337864.html>.

Wang, Z 2019, Huawei Strengthens Its Overseas Expansion, Equal Ocean, viewed March 2022,
<https://equalocean.com/news/2019050611011#:~:text=Huawei%20began%20its%20overseas
%20expansion%20in%201994%2C%20and,Russia.%20After%20that%2C%20Huawei
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