By Chaoting Cheng

March 30, 2019

1. Introduction

Huawei is widely regarded as China’s most outstanding, powerful, and most aggressive ICT (Information Communication Technology) company. It has been committed to entering the U.S. market. However, contrary to its outstanding performance in other markets, Huawei has long failed to achieve a major breakthrough in the U.S. market. This is so because the state apparatus of the U.S. has prevented American customers from purchasing Huawei’s products, solutions, and services on the grounds of national security. In 2018, the U.S. launched its strongest ever actions against Huawei. In December 2018, the U.S. Department of Justice ordered the arrest of Huawei’s CFO Meng Wanzhou on the grounds that the company was suspected of violating US sanctions against Iran, and asked Canada to extradite Meng to the United States for trial. At the same time, the United States decided to ban Huawei from participating in the construction of the 5G network of strategic importance. A lot of signs indicate that the U.S. state apparatus has made the crackdown on this successful technology company—which is seen as the epitome of China’s rise—an important strategic goal, and is sparing no effort to mobilize its traditional and emerging allies to join its ranks.

In stark contrast to the frosty reception and restriction in the U.S. market, Germany has been quite welcoming for Huawei’s investment and business activities. Huawei also places special emphasis on the German market, and its Western European headquarters is located in a western German city, Düsseldorf. This is not only because of Germany’s leading market size in Europe, but also because as a major developed country Germany’s acceptance and recognition has an extraordinary demonstration effect for Huawei’s business development in the global market. Over the years, Huawei has continued to invest a lot of resources in Germany, and its market share continues to increase. Germany is so important for Huawei that Torsten Küpper, head of Public Relations of Huawei Germany, called Germany the “second hometown” of Huawei (MA REVIEW, 2016).

However, as Germany’s most powerful ally and security provider since the end of World War II, the United States urged Germany to follow Australia, New Zealand, and Japan to join its international action against Huawei and to ban Huawei from participating in construction of the 5G network. Hence, Germany faces a difficult decision to choose between the two most powerful countries of the world: the United States and China.

This article is not intended to predict how Germany will take sides, but to systematically analyze the similarities and differences between Germany and the United States in terms of position and policy towards Huawei, the opinions of different German stakeholders, the determinants of German decision-making, as well as the impacts of German decision on Sino-German relations and the changing world order.

2. Huawei in the U.S. and the U.S. policy towards Huawei

2.1. Huawei’s development in the United States

The United States is the world’s leading communications equipment market with a market capacity of US$83.22 billion in 2016 (GRAND VIEW RESEARCH, 2018) and is expected to reach US$125.1 billion by 2025 (PR Newswire, 2018). Therefore, breaking through the U.S. market has a decisive strategic significance for ambitious Huawei.

As early as in 1999, Huawei opened a research institute in Dallas to develop products specifically for the U.S. market. In June 2001, Huawei established FutureWei, a wholly-owned subsidiary in Texas, to begin selling broadband and data products to local businesses.

As Huawei advanced in the U.S. market, doubts about Huawei’s products came to the fore. In early 2003, Cisco sued Huawei in a court in Texas for infringement of its intellectual property rights. After one year and a half of patent disputes, the two sides finally reached a settlement. However, this dispute seriously affected Huawei’s reputation in the U.S. market, making Huawei’s business progress very slow (Jiemian, 2017).

In 2007, Huawei and the U.S. mobile operator LeapWireless reached a mutual agreement – a first for Huawei. Thereafter, Huawei began to make some market progress. However, Huawei mainly provided services to some small and medium-sized operators, and has been unable to enter in league with the four major communication operators in the U.S. market (Verizon, AT&T, Sprint, and T-Mobile) (Jiemian, 2017).

After 2008, Huawei tried to adopt a merger and acquisition (M&A) strategy to promote its business development in the United States, but Huawei’s M&A attempts were repeatedly blocked. The landmark events are as follows (CKGSB, 2017):

Three attempts of M&A were rejected

  • In 2008, together with Bain Capital, Huawei attempted to acquire 3Com and was rejected by the Committee on Foreign Investment in the United States (CFIUS);
  • Huawei’s attempt to acquire Motorola’s wireless assets in 2010 was also rejected by the U.S. government;
  • In 2010, Huawei attempted to acquire 2Wire, a broadband network software vendor, but failed because it was unable to obtain approval.

A purchase of patent was rejected

  • In 2010, Huawei acquired 3Leaf’s patented technology for US$2 million, but this deal was once again considered by CFIUS as “threat to U.S. national security”. Huawei finally revoked the transaction in February 2011.

In addition to the failures of M&A, Huawei’s contracts for supplying 4G equipment with AT&T (in 2009) and Sprint (in 2010) were also rejected by intervention of the U.S. National Security Agency (NSA) (USCC, 2011) and the U.S. Department of Commerce (WSJ, 2010).

In October 2012, after more than one year of investigations on Huawei and ZTE, the U.S. House Intelligence Committee issued a report accusing the two largest Chinese telecommunications equipment companies of being arms of the Chinese government that had stolen intellectual property from American companies and could potentially spy on Americans. The House Intelligence Committee came to the conclusion that Huawei and ZTE were a national security threat because of their attempts to extract sensitive information from American companies and their loyalties to the Chinese government. Therefore, the United States government was asked to not do business with Huawei and ZTE and American companies were recommended to avoid buying their equipment (NY Times, 2012).

After the report of the House of Representatives, the network equipment market of U.S. telecommunications operators was closed for Huawei. But Huawei still tried to sell mobile phones and other terminal products in the United States. However, this too was also strongly restricted. In January 2018, at the urging of U.S. lawmakers, AT&T, a large US telecommunications operator, cancelled its Smartphone deals with Huawei. The reason behind this was the concern that Huawei “will pose a threat to U.S. national security” (REUTERS, 2018).

In March 2018, according to the suggestion of CFIUS, U.S. President Donald Trump blocked Singaporean Broadcom’s hostile takeover bid worth of US$117 billion of Qualcomm, a well-known American communications chip and wireless technology company. The reason was that CFIUS is worried that successful acquisition by Broadcom will lead to possible reduction of R&D investment in Qualcomm, which will indirectly benefit Qualcomm’s Chinese competitor Huawei—thereby jeopardizing the “national security” of the U.S. (Bloomberg, 2018). The Trump Administration is extremely concerned that Huawei as a Chinese company could gain technological superiority and dominance over the United States, especially in the field of 5G mobile communications—which is regarded as the battlefield of the new era of arms race by the U.S. government. Compared with previous U.S. Administrations, the Trump Administration’s restrictions against Huawei have increased.

Along with the U.S. government, the U.S. Congress is also alert to the operations of the two Chinese ICT companies, Huawei and ZTE. Following the 2012 House Intelligence Committee report, the Senate’s 2019 John S. McCain Defense Authorization Act, passed on July 22, 2018, explicitly forbade the U.S. federal government to purchase any equipment or services from Huawei or ZTE .

2.2. U.S. launched actions against Huawei

In early December 2018, the U.S. Department of Justice issued a warrant for the arrest of Huawei’s CFO Meng Wanzhou on the grounds of suspected violation of the U.S. sanctions against Iran. The U.S. also asked Canada to extradite Meng to the United States for trial. Moreover, according to a New York Times report on February 12, 2019, President Trump will issue an executive order to prohibit U.S. telecommunications operators from using Chinese equipment in the construction of next-generation wireless networks (NY Times, 2019a), thereby excluding Huawei and ZTE—especially Huawei, which is a leading technology company in 5G field—from 5G network rollout in the U.S. market. At the same time, the U.S. government launched high-profile international action against Huawei, demanding that the international community, especially American allies, follow the United States and ban Huawei from participating in the construction of 5G networks. U.S. Secretary of State Mike Pompeo even warned that the United States will not be able to partner or share information with countries using Huawei equipment (REUTERS, 2019). This is obviously a strong signal asking countries to choose between the United States and China.

Rome was not build in a day. The United States’ restrictions against China’s leading ICT companies, Huawei and ZTE—especially against Huawei, which is more powerful—have been long in the making in treating them as threats to “national security”. Concrete policies and measures to prevent and restrict them are also being implemented. In this regard, both Republicans and Democrats, both the House of Representatives and the Senate, and the federal government have reached a consensus.

2.3. Analysis and Interpretation of U.S. actions against Huawei

The U.S. arrest of Huawei’s CFO and a series of strong actions against Huawei are not just legal and  network security technology issues, but also geo-economic issues related to economic and technological competition. In other words, this is a geopolitical issue.

Legal perspective

It cannot be denied that the United States has also punished many American and other countries’ companies violating U.S. sanctions, but it is extremely rare to directly arrest company executives (Project Syndicate, 2018). In the view of Huawei’s founder Ren Zhengfei (Meng Wanzhou is also his daughter), the purpose of the U.S. move is to achieve the biggest hit on Huawei (Sina新浪, 2019). Taking making business with Iran as a basis for punishment might be justified from a legal perspective, but it is very suspicious politically. Even if it is legally justified, there is still a possibility of “selective” law enforcement. As an article published in Forbes magazine pointed out, many U.S. companies trade all the time with Cuba, Iran, Sudan, and Syria. They just do so through intermediaries (Forbes, 2018). Moreover, the legal basis for supporting this arrest—“long arm jurisdiction”—is not a rule of international law. Many countries believe that it seriously violates the principle of international law that “a country should not exercise state power in the territory of another country”, therefore they do not recognize the validity of its jurisdiction. In the eyes of Beijing, the U.S. is exercising its state power to suppress a Chinese company regarded as a source of national pride in China: the substance of the issue is that the U.S. is using legal means to replace fair market competition.

Network security perspective

Given the strategic importance of 5G infrastructure, the U.S. government places great emphasis on cyber security. In order to address concerns about China’s rapidly increasing influence on the global communications supply chain, the National Security Council has had the idea of building a “nationalized” national 5G network by the state rather than private operators so as to strengthen control over the network (Bode, 2018). Although this plan has not been implemented, considering that the United States has a liberal tradition of “small government, big market” and has always avoided excessive involvement of the state in economic affairs, the U.S. government’s unprecedented emphasis on 5G network security should by no means be underestimated.

For Huawei, entering the markets of developed countries like the United States and Western Europe is of particular importance. On the one hand, the huge size of the U.S. and European markets is very attractive for Huawei—which is extremely focused on business expansion. If Huawei’s products and solutions are recognized by highly demanding European and American customers, this will have a great demonstration effect for other countries. Therefore, Huawei often invests a lot of resources at all costs and does not miss any opportunity to enter the European and American markets. In 2010, in order to address the British government’s concerns about the safety of Huawei products, Huawei and UK’s highest-level intelligence department, the Government Communications Headquarters (GCHQ), jointly established Huawei Cyber Security Evaluation Centre, which is responsible for conducting the safety assessment of Huawei’s products deployed in the UK market. On February 21, 2019, the Financial Times reported that Ciaran Martin, Director of the National Cyber Security Centre (NCSC) under GCHQ, said he was confident that the UK network security authority will be able to control any risk posed by Huawei even if the British government allowed it to participate in the construction of a 5G network. In a speech in Brussels, Martin said that although U.S. intelligence agencies raised concerns about espionage and disruption, he believed that strict controls and supervision could offset the risks (Financial Times, 2019).

The United Kingdom is a close ally of the United States, and the NCSC has had many years of practical experience in assessing the safety of Huawei products. Therefore, the conclusions of the UK cyber security authority are quite weighty, indicating that security concerns about Huawei’s products can, at least, be technically addressed. Although the United States has always suspected that Huawei’s products have a “back door” which could be used by the Chinese government and military to engage in espionage, but this has never been proved. Therefore, it is difficult to believe that the debate on security issues around Huawei is only a purely technical issue.

Geo-economic competition over 5G technologies

The Trump Administration believes that the world is engaged in a new arms race. Although this is a competition involving technology, not conventional weapons, it poses an equally significant threat to U.S. national security. In an era in which the most powerful weapons are controlled by computer networks, any country which dominates 5G technology will have economic, intelligence, and military advantages throughout this century. The United States has lagged behind Europe and China in the eras of 3G and 4G, and Huawei’s overall lead in 5G technologies has further worried the United States. Therefore, the United States is determined to take all possible measures to block Huawei in order not to lose in this vital competition (NY Times, 2019b).

According to Jeffrey Sachs, a professor at Columbia University, “Quite transparently, the U.S. action against Meng is really part of the Trump Administration’s broader attempt to undermine China’s economy by imposing tariffs, closing Western markets to Chinese high-technology exports, and blocking Chinese purchases of U.S. and European technology companies. One can say, without exaggeration, that this is part of an economic war on China, and a reckless one at that. America’s motivations in this economic war are partly commercial—to protect and favor laggard U.S. companies—and partly geopolitical. They certainly have nothing to do with upholding the international rule of law. The Trump Administration, not Huawei or China, is today’s greatest threat to the international rule of law, and therefore to global peace (Project Syndicate, 2018).”

Economic development is fundamentally driven by innovation. Although the United States still has overall advantages, China is catching up quickly in all directions. In some areas, such as 5G, China is even ahead of the U.S. For the U.S., loss of technological dominance is unacceptable and it is determined to use all its means to defend its innovation advantages. In the Sino-American trade war, the real interests of the United States lie in not just reducing its trade deficit towards China. Since a large part Chinese exports actually come from American companies, the trade deficit is actually not the root cause of the trade war and China’s gains are not as large as the numbers indicate. If the goal is only to reduce the trade deficit, then China is actually willing to make concessions and the negotiations should have reached an agreement. The real purpose of the United States is to stop the advancement of China’s high-tech industry (BBC, 2019a).

Geopolitical competition and ideological confrontation between the U.S. and China

In fact, Huawei’s huge market share in Europe shows that it is widely accepted in Western countries. However, the key issue is that Huawei is a Chinese company. William R. Evanina, the Director of U.S National Counterintelligence and Security Center, said, “It’s important to remember that Chinese company relationships with the Chinese government are not like private sector company relationships with governments in the West. China’s National Intelligence Law passed in 2017 requires Chinese companies to support, assist and cooperate with China’s intelligence agencies, wherever these companies operate (NY Times, 2019b).” China is an authoritarian country and a Chinese company like Huawei is unable to resist the demands of the Chinese government. Therefore, the network equipment of Huawei poses a potential threat to the national security of the U.S. (BBC, 2019b). At the Munich Security Conference held in February 2019, the U.S. Vice President Mike Pence once again emphasized that “The United States has also been very clear with our security partners on the threat posed by Huawei and other Chinese telecom companies, as Chinese law requires them to provide Beijing’s vast security apparatus with access to any data that touches their network or equipment (SCMP, 2019)”. This shows that the United States is worried not about Huawei per se but China’s state apparatus as a whole: the actions against Huawei are not only pure legal issues, but also a significant geopolitical action.

Heli Tiirmaa-Klaar, an Estonian diplomat involved in cyber security discussions with American and European officials about Huawei, said Europe was shifting on Huawei because of suspicions about China rather than any specific behavior of this company. She highlighted China’s history of hacking and stealing trade secrets, its poor record on human rights and internet censorship, and Chinese cyber security rules that could require Chinese enterprises to defend China’s national security interests (NY Times, 2019c).

James Andrew Lewis, the Senior Vice President and Director of Technology Policy Program from the American think-tank, Center for Strategic and International Studies, believes that “If China was not a strategic competitor, buying Chinese telecom equipment would pose little risk, and commercial partnership would serve both sides (Lewis, 2018).” But, unfortunately, according to the National Security Strategy released by the Trump Administration in December 2017, the United States has regarded China as its primary strategic competitor. This means that Huawei, as a Chinese company, will pose a major threat to the national security of the U.S. through its communication network equipment. Therefore, the issue of Huawei has actually become a matter of geopolitical competition between the United States and China.

In addition, the ideological differences between the U.S. and China have also played a role in this dispute. In the eyes of the United States, China’s authoritarian state capitalism model is significantly different from the liberal market capitalism of Western countries. At present, this model has a certain attraction to some developing countries. Given its great success over the past few decades and its huge scale, China is now eligible to compete against the Western model. In recent years, China has vigorously promoted its “Belt and Road Initiative”. From the perspective of the United States, China is not only pushing through its geopolitical “grand strategy”, but also trying to export its development model which is remarkably different from the “Washington Consensus”. Thus, China is increasingly challenging the international order and structure established and dominated by the U.S. and Western countries in not only geopolitical but also ideological terms.

Since Huawei has achieved great business success, especially in overseas markets, most Chinese people prefer to ignore the ruthless management of this company and regard it as emblematic of China’s national pride. The United States’ attack on this company, widely admired in China, without incontrovertible grounds will probably provoke Chinese people’s nationalist sentiments, thus boosting the influence of nationalist forces in China’s domestic politics and further strengthening China’s authoritarian regime. Therefore, in terms of promoting more “liberalization” in China, the actions against Huawei seems to be counterproductive.

3. Overview of Huawei in Germany and the dilemma facing Germany

3.1. Overview of Huawei in Germany

As early as 2001, Huawei began to develop business in Germany. After years of efforts, all of its three major businesses groups (carrier business group, consumer business group, and enterprise business group) have made great progress. At present, Huawei is the prime strategic partner of Germany’s three major telecommunications operators (Deutsche Telekom, Vodafone, and Telefonica) in terms of supplying network equipment. For the smartphone business, Huawei’s market share has surpassed Apple and made it the second largest mobile phone brand after Samsung. In addition, Huawei provides products and solutions of cloud computing, Internet of Things, enterprise network, and network security for various industrial sectors. It has also achieved major breakthroughs, such as building a smart city for Duisburg and providing high performance computing solutions for BMW.

For Huawei, the German market is of extreme importance—perhaps second next to the Chinese market. On the one hand, the German market is huge; on the other hand, Huawei is a company coming from a developing country, therefore its Chinese managers are extremely eager to win the acceptance and recognition of the main, established, Western developed countries such as the U.S., the UK, France, and Germany. However, the United States, the UK, and France have imposed more restrictions on Huawei than Germany. Germany’s attitude towards Huawei is relatively more pragmatic, allowing this Chinese company to utilize Germany’s free and open economic environment to gradually grow into a heavyweight player. Huawei is also trying to make its projects in Germany references for its customers around the world. Therefore, Huawei has made huge investments in Germany regardless of cost. In 2007, Huawei moved its European headquarters from the UK to Düsseldorf, a western German city, and established its European R&D center in Munich to manage its 18 R&D institutions across Europe. From 2014 to 2018, Huawei invested US$400 million in Munich. By the end of 2015, Huawei had more than 2,000 employees in Germany, it is now one of the largest Chinese enterprises in Germany (MA REVIEW, 2016). Today, Huawei is prominent in Germany, and the industries and German federal government must think carefully when dealing with issues related to Huawei.

3.2. Germany’s dilemma in taking sides between the U.S. and China

The United States has not only banned the purchase of Huawei’s products in the U.S., but also launched a high-profile international action against Huawei and urged its allies to join it. Currently, among the countries of the U.S.-led “Five Eyes Intelligence Alliance” (U.S., UK, Canada, Australia, and New Zealand), Australia and New Zealand have decided to follow the U.S. The UK has not yet decided, but British Telecom (BT) has decided that in the future Huawei shall be excluded from the core network of the 5G (but Huawei is still allowed to participate in the construction of wireless network). Moreover, BT will dismantle Huawei’s equipment in the existing core network; Canada has not yet made a decision. In addition, Japan, as a close ally of the United States in East Asia and China’s geopolitical rival, also announced in December 2018 that Huawei would be excluded from the government procurement list. Japan’s three major telecommunications operators also indicated that they would follow the government’s decision to prevent Huawei from participating in construction of its 5G network (BBC, 2019c).

Among the European allies of the U.S., Germany’s decision is crucial and all of Europe is watching Germany. According to the political news website POLITICO, in a closed-door meeting in December 2018, U.S. technology experts presented German policymakers with information they described as “reasons” to exclude Chinese telecom giant Huawei from the rollout of 5G technology in Germany. U.S. officials know Berlin’s attitude is crucial when it comes to setting the tone toward Huawei across Europe. As the bloc’s largest economy, Germany’s decision on whether to restrict the Chinese company is likely to serve as a model for other European countries, many of which depend on Berlin’s cyber security expertise (POLITICO, 2018). It will also determine whether the U.S. campaign is as successful in Europe as it was in Australia, Japan, and New Zealand.

Given that Germany will auction 5G spectrum in the spring of 2019 and that telecommunications operators are in the process of starting 5G construction, this sudden pressure from its powerful traditional ally, the U.S., is putting Germany in a dilemma. On the one hand, Germany must seriously consider the demands of the U.S. On the other hand, in complying with the U.S. Germany risks angering China—an emerging superpower and Germany’s largest trading partner. Hence, it is very difficult for Germany to make a choice.

3.3. The opinions of German stakeholders on Huawei

Although all parties are turning their attention to the German federal government on the question of whether to allow Huawei to participate in construction of the 5G network in Germany, as a democratic country the German government cannot ignore the opinions of other stakeholders. It must consider both domestic and international factors in order to make a final decision. The following is a brief analysis:

Telecommunications operators (Deutsche Telecom, Vodafone, and Telefonica)

Deutsche Telekom is the largest multinational telecommunications operator in Europe and has enjoyed a good relationship with Huawei for many years. On the one hand, Deutsche Telekom CEO Timotheus Höttges said, “the security of the network infrastructure, both past and present, is very important for us.” On the other hand, Deutsche Telekom continues to cooperate with Huawei. Given Huawei’s technological leadership and price advantages, the progress of Deutsche Telekom’s 5G rollout will get inevitably delayed and its construction costs increase if Huawei is not allowed to participate in the construction of the 5G network (Handelsblatt, 2019a).

Nick Read, CEO of the UK-based Vodafone Group’s German subsidiary, expressed some support for Huawei. He said, “We cannot ignore the fact that Huawei has occupied 35% of the entire European market. If Huawei is excluded, the progress of 5G network construction will be slowed down and the cost will increase. We need to clearly define which parts of the network can be built by Huawei, whether it is a sensitive core network or just a wireless access network.” Given the security concerns, Vodafone decided that Huawei’s products will no longer be used in the core network. However, Nick Read also defended Huawei. He said, “I feel that Huawei is open to the current situation and is working hard to improve the security of its products (Handelsblatt, 2019b).”

Telefonica O2, another major German telecommunications operator, has opinions similar to Deutsche Telekom and Vodafone. It does not want to ban Huawei from participating in its network construction either.

In order to address security concerns, Deutsche Telekom even suggested establishing a technical supervision agency similar to TÜV to ensure the security of network equipment, for which Vodafone and Telefonica expressed their support (SZ, 2019).

German industries

Although the Federation of German Industries (Bundesverband der Deutschen Industrie, BDI), an organization representing the interests of German industries, has in an recently issued policy document highlighted the challenges of China’s state control model to Europe and Germany, it also emphasized that “a general ‘containment’ of China or ‘de-coupling’ (in the U.S. this term is used to discuss the disengagement in economic ties with China) is not an option; German industry advocates ex-change and cooperation (BDI, 2019)”. BDI also demonstrated its independence in safeguarding the interests of the German industry in deliberating whether or not Huawei should be allowed to participate in the construction of a 5G network in Germany. BDI Chairman Dieter Kempf clearly warned against excluding Huawei from the construction of 5G networks. He believes that this will lead China to take countermeasures, which will hurt the interests of German enterprises in China. At the same time, Dieter Kempf also supports the opinions of telecommunications operators that the exclusion of Huawei will limit the choice of suppliers and therefore result in increased network construction costs. Kempf further criticized the U.S. government’s pressure to impose pressure on Germany. He said, “The United States could be tempted … to enforce its own sanctions on others with its economic power. It seems that the motto is ‘who my enemy is, must also be my friend’s enemy’.” However, that is not his philosophy, emphasized the BDI President: “And it contradicts our European idea of free, rule-based world trade (FAZ, 2019a).”

IT Security Authority

Arne Schönbohm, head of the German authority responsible for network security—Federal Office for IT Security (Bundesamt für Sicherheit in der Informationstechnik, BSI)—made it clear that banning or allowing Huawei’s participation in 5G network construction is a “political decision”. In other words, this is not a technology issue pertaining to network security. According to Arne Schönbohm, “BSI’s mission is to ensure that Germany has a secure network architecture. Until now, the so-called “back door” of Huawei products that can shut down German telecommunications network has not been discovered (Handelsblatt, 2019c).”

Intelligence service agency

However, the attitude of the German intelligence service agency is much more pessimistic as they believe the use of Huawei’s products would have risk of espionage and destruction. From the perspective of German intelligence service, the mobile telecommunications network is a critical infrastructure and must be specially protected—and the risk that Huawei may install a “back door” cannot be overlooked. Although the argument of “back door” is only an unconfirmed suspicion, Gerhard Schindler, the former director of the Federal Intelligence Agency (Bundesnachrichtendienst, BND), said, “Telecommunications technology provider is also capable of intercepting communications, you can deploy security systems and minimize risk, but the risk is still there.” Schindler estimates that Huawei has been leading the 5G technology for one and a half to two years, so that the German state apparatus simply cannot judge which modules Huawei has installed. This means, “In times of crisis, if these modules are shut down, we will be unprepared and unable to react (DW, 2019).”

Federal Ministry of the Interior and Federal Ministry of Economic Affairs

Given the security concern, the German Federal Ministry of the Interior is discussing with the Federal Ministry of Economic Affairs to revise the German telecommunications law to de facto exclude Huawei. According to the Ministry of the Interior, the Telecommunications Law should make the following changes: telecommunications operators and equipment suppliers must be able to ensure that there is no (foreign) state influence. However, the revision of the Telecommunications Law is a long process, which means that in theory the current German law cannot exclude any foreign suppliers (including Huawei) from construction of the 5G network (DW, 2019).

Ministry of Foreign Affairs

The German Foreign Ministry seems to be oblivious to the fact  that China is Germany’s largest trading partner and both countries have a strategic partnership. Their attitude is similar with that of the Ministry of the Interior. A spokesperson for the Ministry of Foreign Affairs stressed that Huawei is a Chinese company subject to Chinese law, and expressed concern that Chinese companies have the obligation to cooperate with Chinese intelligence agencies (DW, 2019).

German Chancellor

As the head of the German government, Merkel has always been cautious about important issues, especially the sensitive issue of taking sides between the two most powerful countries in the world. On February 5, 2019, Merkel said during her visit to Japan, “Given the security concerns, it is necessary to discuss with the Chinese government that companies (of China) cannot pass data to (Chinese) state (FAZ, 2019b).” She is actually setting conditions for Huawei to participate in the construction of the 5G network in Germany. It cannot be denied that Merkel is a seasoned politician. She has exerted “strategic ambiguity” to avoid clearly taking sides between the United States and China by considering the demands of both countries. Of course, it is also possible that she is buying time in order to make final choice.

In addition to the stakeholders such as telecommunications operators, German industry, and the German government, it must be mentioned that Germany is a democratic country and public opinions often play a role in government decision-making. Accordingly, it is difficult to ignore the fact that German media reports on China are mostly negative.

China is Germany’s largest trading partner and German companies have huge investments and economic interests in the Chinese market. Germany and China have established comprehensive and profound strategic partnerships. Moreover, as a middle power, Germany does not have the ambition, will, and resources to confront China geopolitically. However, the United States is Germany’s traditional ally and a powerful provider of security. The tough demands of the U.S. have given the German government a difficult choice. The final decision of the German government is still unclear. However, what is clear is that the German government will not make decisions quickly, but will carefully evaluate the situation and find the best balance in line with German interests. Some people even think that, given the importance of this matter, the German parliament and not the German government will have the final say (KN, 2019).

4. Can the United States form a united front against Huawei?

Although the United States has spent a lot of efforts to convince its allies and other countries not to use Huawei’s network equipment, it has had only limited results. At present, only the governments of Australia, New Zealand, and Japan have clearly stated that Huawei will be excluded from the construction of 5G networks (BBC, 2019c). However, on February 19, 2019 the Prime Minister of New Zealand, Jacinda Ardern, said that her government had not yet made a final decision on use of Huawei’s equipment in the 5G network (VOA, 2019). Therefore, to date, only Australia and Japan have explicitly followed the United States.

These signs show that this time the United States might have difficulties in successfully forming a united front against Huawei and China. Some European commentators believe that President Trump has undermined the trust between Europe and the United States, making it difficult for Europe to choose between China and the United States. At present, European countries will take precautions against Huawei, especially in its role as supplier of core networks, but they are not willing to explicitly exclude Huawei from the entire 5G network. Of course, Europe also knows that Huawei is not completely irreplaceable. The restrictions on Huawei may be beneficial to European suppliers of telecommunications equipment: Ericsson from Sweden, Nokia from Finland, and Alcatel-Lucent from France.

If a Sino-American confrontation is on the line, then the ability of the United States to form alliances and control allies seems to be declining as compared to Cold War 1.0. In March 2015, as the closest ally of the United States, the United Kingdom did not hesitate to anger the United States and joined the China-led “Asian Infrastructure Investment Bank” (AIIB). Like other middle powers, Britain relies no longer solely on the United States but bets on both sides. For the UK, this is a matter of life and death. The focus of British economy lies in the service sectors, especially the financial service industry. If the UK cannot serve the financial and economic interests of a rising China, then the UK will be marginalized in the 21st century. In fact, apart from cooperating with China, the UK does not have much choice (Lind, 2018).

Other European allies of the United States are also reluctant to sacrifice their commercial interests with respect to China by blindly obeying America’s strategic needs. Compared with the formidable Soviet Red Army in Cold War 1.0 period, China’s growing military power does not pose a direct threat to Western Europe. Ideologically, China is not as aggressive as the former Soviet Union which claimed to “bury the capitalist system”. If the United States intends to contain China from now on, it would be difficult to win full recognition and acceptance of the Western European countries as it did during Cold War 1.0. Of course, the United States might not be very concerned about this. For the United States, the most important partners to contain China can be found in Asia-Pacific region: Japan, South Korea, and Taiwan are much more important in this regard than Western Europe. The “Indo-Pacific strategy” proposed by Japan, supported by Australia and India, and finally accepted by the United States, will become the main geopolitical strategy to contain China. The “democratic security diamond” comprising of the United States, Japan, Australia, and India will probably become a multilateral military alliance similar to NATO in Europe. Moreover, even if “old Europe” (France and Germany) does not follow the instructions of the U.S., the United States can still find more obedient partners in “New Europe” (Central and Eastern European countries).

With its considerable strength and remaining leadership, the United States could form a united front to contain China. However, the internal solidarity of this coalition is quite suspicious. During the Cold War 1.0 period, the Eastern Bloc broke out between China and the Soviet Union. China turned to the United States and it was a strategic blow to Soviet leadership. Similarly, inside the Western Group, President Charles de Gaulle of France promoted independent foreign policy, built independent nuclear power, and withdrew from NATO. Even loyal West Germany advocated a “New Eastern Policy” under the Brandt government, under which West Germany tried to improve relations with the Eastern Bloc countries: this demonstrated the independence of West Germany. In 2003, the United States insisted on starting a war against Iraq, but France and Germany were openly and resolutely opposed. Similarly, in 2015, the UK, France, and Germany joined the China-led AIIB at the price of angering the United States. Therefore, even if the United States can successfully form a united front to contain China, it cannot guarantee that the member states will fully obey its will, and American values do not allow the United States to suppress the indiscretions of its allies by using force, as the former Soviet Union did with Hungary (1956) and with Czechoslovakia (1956) during the Cold War 1.0.

However, it is debatable if Germany will be able to withstand pressure from the United States on the issue of Huawei. After Tian’anmen incident in 1989, Europe and the United States imposed an arms embargo on China. For years, China has been trying to persuade the EU to lift the embargo. The then German Chancellor Gerhard Schröder supported China’s request, and together with France vigorously promoted the lifting of the EU arms embargo on China. However, due to strong opposition from the United States, the effort finally failed. In some sense, today’s issue of Huawei’s entry into 5G network construction is similar to China’s request to ask the EU to lift the arms embargo.

5. The prelude to Cold War 2.0?

On March 5, 1946, accompanied by U.S. President Truman, Churchill made the famous “Iron Curtain” speech in the United States, giving voice to the serious and urgent threat of Soviet expansionism. Churchill’s speech is widely regarded as a crucial moment in the genesis of the Cold War. U.S. Vice-President Mike Pence’s tough speech on China at the Hudson Institute in October 2018 was also considered by many to be a mobilization for Cold War 2.0 against China, which can be compared with Churchill’s speech to open Cold War 1.0. If the United States and China are entering a new cold war, this time it would be significantly different from the old Cold War. The former Soviet Union relied mainly on its formidable military power to confront the West and posed a direct military threat to Western Europe. Moreover, the communism of the Eastern Bloc and the liberal democracy of the Western countries also constituted a fierce ideological confrontation. However, the rise of China is mainly due to its unprecedented economic development and rapid progress in science and technology. Its people’s living standards have improved significantly: this, in turn, constitutes an important and main source of the legitimacy for the rule of the Chinese Communist Party. Another source is nationalism, but nationalism has always been a dangerous double-edged sword and Chinese rulers must use this force carefully. Therefore, if the United States wants to launch a new Cold War against China, economy and technology will be the main battlefields and the confrontation of military power and ideology will play a secondary role. However, if the United States and China cannot properly manage and control conflicts between them, it cannot be ruled out that the economic and technological contests will escalate to a full-scale confrontation of military power and ideology.

In this context, as the epitome of China’s rise and an outstanding representative of China’s scientific and technological progress and economic development, Huawei has become the primary target of the United States. This is not surprising: it is a logical development of the Sino-American confrontation.

One year after Churchill’s “Iron Curtain” speech, in March 1947, U.S. President Truman gave a speech in Congress, which was later called “Trumanism”. Truman announced that the United States was willing to provide economic and military assistance to the Greece government to fight against the Communist Party. Turkey faced a similar situation as Greece and would also receive U.S. aid. Trumanism meant the end of the alliance with the Soviet Union during the World War II and marked the beginning of the Cold War, since then the United States began to provide financial means to contain the Soviet Union. Similarly, U.S. Vice President Pence’s tough speech against China might be a public mobilization. Shortly afterwards, a comprehensive attack on Huawei started, probably marking the beginning of the new Cold War against China. The previous crackdown on ZTE could be considered a strategic rehearsal. The result was a great success. The Chinese side accepted all U.S. demands, even the assignment of U.S. inspectors to ZTE at ZTE’s costs. Success of the action against ZTE is likely to give U.S. the confidence to beat Huawei.

The Sino-American trade war was initiated by the United States. It is hard to conclude that China is willing to participate in this conflict that may terminate its rise. However, China’s eagerness to seek success and its daring strategic advances in recent years have probably led it into a “Thucydides trap”. Now that China has abandoned Deng Xiaoping’s strategy of keeping a low profile, it will surely bring the Sino-American showdown ahead of schedule—which will be greatly detrimental to China’s own future.

6. Conclusion

The actions of the U.S. against Huawei, emblematic of Chinese national pride, have touched sensitive nerves in both countries. The U.S. and China seem to be accelerating their fall into the so-called “Thucydides trap”: this has led to overwhelming discussions and uneasiness around the world. The arrest of Huawei’s CFO and the subsequent demand to ban Huawei from participating in the construction of vital 5G networks is not only a legal issue, technical issue, and geo-economic issue: it is also a geopolitical issue. Only in this context we would be able to understand why the U.S., a superpower, is worried about a Chinese company. Since the end of the Cold War, the world has undergone profound changes and a major power shift is taking place. The United States has gradually reached a conclusion that China is its prime strategic competitor, capable of challenging American hegemony over and above Russia, its traditional rival. The United States will not tolerate the strategic balance to continue leaning towards China. Under the leadership of President Trump, the United States will take firm and decisive actions to ensure that the United States continues to be the superpower with world hegemony. Faced with this situation, most countries are unable to stay outside. In the turmoil of whether or not Huawei should be allowed to participate in the construction of a 5G network, Germany is at the forefront of the storm and faces a difficult choice between the U.S. and China. Germany’s decision will have a major demonstration effect, and all of Europe is watching Germany. However, Germany will not make a quick choice. Instead, it will carefully evaluate the situation, consider all parties’ attitudes, repeatedly calculate the pros and cons, and then take a final decision that should be in line with German interests.

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0 # Chaoting 2019-07-16 10:11
Very important topic!
0 # Chaoting 2019-07-16 10:12
I look forward to your comments. Many thanks!