TradeEdge Exchange:Germany moves toward restrictions on Huawei, as Europe sours on China

BERLIN — Germany's government said Tuesday it is TradeEdge Exchangecarrying out a review of tech suppliers such as China's Huawei and ZTE, whose equipment is used in Germany's 5G networks.

Maximilian Kall, a spokesperson for Germany's Interior Ministry, confirmed the review in a press conference, saying it is important for German telecommunications operators to "not be too reliant on certain providers," and warning that if security risks are discovered by early April, German firms would not be compensated by the government for parts that would need to be ripped out of their networks and replaced.

The comments came after German media outlets Die Zeit and Handelsblatt reported on Monday that Berlin is planning to ban certain components made by Chinese suppliers Huawei and ZTE from use in Germany's 5G networks.

A 2022 report compiled by Danish firm Strand Consult found that 59% of the components that made up Germany's 5G radio access network were supplied by Chinese vendors like Huawei and ZTE.

If such a ban were imposed, Germany would join Britain and Sweden in banning the Chinese companies' equipment in their 5G critical infrastructure.

The U.S. has also banned Huawei, and placed extraordinary restrictions on sale of semiconductors to the telecom giant.

Such a ban would mark a turning point for Germany's relationship with China.

"The 5G decision should have been the easy part and should have been done long ago," says Thorsten Benner, director of the Global Public Policy Institute in Berlin. "You don't make yourself dependent on companies that are beholden to the Chinese party-state, because that would repeat mistakes we've made with Russia."

A ban would make Germany the latest European country, albeit the largest economy and with the closest commercial ties, to sour on China. Analysts and experts say this is a trend expected to accelerate in the coming years, as China's ties with the U.S. especially — and the West in general — sour over everything from trade and human rights, to support for Russia in its war in Ukraine, and over Taiwan.

Europeans are starting to favor a tougher stance on China

A transatlantic survey by the German Marshall Fund last September showed a plurality of European respondents support a "tougher" approach toward China, with nearly half of all respondents placing Beijing in either the "competitor" or "rival" category.

This was particularly pronounced in Sweden, Lithuania, Poland, the Netherlands and Germany. "I think the tide in Europe has turned in the last few years," says Martin Hala, director of Sinopsis, a Prague-based think-tank that follows China.

"It's pretty much the same process of awakening to some of the unpleasant realities [of China] that we have seen in the United States and Australia before that," adds Hala.

The European Union and China have been strategic partners since 2003. However, more recently, EU officials have sharpened their political stance against Beijing by labeling China as a "systemic rival" and "strategic competitor" of the EU. Most EU member states, and NATO members, have sided with the U.S. in labeling China a potential threat.

Even before this week's announcement on the Huawei and ZTE review, Germany had already sharpened its stance on China in official documents. But even so, Chancellor Olaf Scholz became the first world leader to visit China's Xi Jinping in November, soon after Xi solidified a third term as secretary of China's Communist Party.

Critics questioned that visit by Scholz and a group of German CEOs, as well as the chancellery's approval of a Chinese shipping company's purchase of a stake in the port of Hamburg prior to the trip.

High-ranking members of Scholz's coalition government, including Foreign Minister Annalena Baerbock and Economy Minister Robert Habeck, have criticized China's foreign policy initiatives, joining other European countries in doing so.

Prague's turning point on Beijing

Next-door to Germany in the Czech Republic (also called Czechia), Petr Pavel let just one day pass after being elected the country's new president before he made a telephone call to Taiwan's President Tsai Ing-wen on Jan. 30.

It made him Europe's first elected head of state to make a call that would anger Beijing, which views the self-governed island as part of China.

Pavel, a former army chief and NATO official, posted on Twitter that his country and Taiwan "share the values of freedom, democracy, and human rights."

In Beijing, Chinese Foreign Ministry Spokesperson Mao Ning said, "China deplores and strongly opposes this and we have made solemn démarche to the Czech side."

Mao urged Prague to "take immediate and effective measures to correct the wrongdoing," but later in the week, the speaker of the Czech Republic's parliament followed up Pavel's phone call with a promise to visit Taiwan in March, effectively ignoring Beijing's threats and making the Czech Republic the latest European country to stand up to China's government.

Hala says Pavel's call to Taiwan's president, and subsequent comments to the Financial Times that "China and its regime is not a friendly country at this moment" and "not compatible with Western democracies in their strategic goals and principles," accurately reflect worsening public sentiment in the Czech Republic toward Beijing.

"The mood in the Czech Republic has turned very critical of the People's Republic of China in the last few years, and the new president-elect reflects that," says Hala.

China's aggressive diplomacy soured the tone

Beijing's recent "wolf warrior" style of diplomacy has led to what Hala calls "a number of incidents and all sorts of embarrassments and scandals" involving Chinese investment and Belt and Road projects throughout central and eastern Europe — including the precipitous fall of Chinese energy company CEFC, whose hundreds of millions of dollars' worth of investments in the Czech Republic went south after the company went bankrupt in 2020.

In recent years, public sentiment throughout Europe has soured, leading to tit-for-tat sanctions between the EU and Beijing over the human rights situation in China's northwestern region of Xinjiang, and then, in 2021, the EU's freezing of an important investment treaty with Beijing.

But as China emerges from the COVID pandemic, Hala says, it appears to be changing its aggressive stance toward Europe. One of Beijing's original wolf warriors, former Foreign Ministry spokesperson Zhao Lijian, has been sidelined, and Beijing's rhetoric toward Europe has softened.

"I think it's kind of obvious that they're trying to change their ways because the previous ways, and specifically the wolf warrior diplomacy, didn't really help them very much," says Hala. "I think it's quite clear now that they're on this charm offensive again. They're sending people to Europe left and right, and they behave quite differently from the Chinese diplomats before."

Hala says China "is losing Europe" and will need to figure out another approach, but warns at this stage, it might be too late.