How to prevent Beijing from being bullied? Take your Prada bags
Beijing has vowed to punish Swedish telecommunications giant Ericsson if the Swedes don’t give in and allow the country’s 5G networks to include Huawei technology. Sweden has not budged, and now China has reduced Ericsson’s access to the world’s largest telecommunications market. No Western business will be safe from such punishment unless Western governments and big business unite to thwart China’s extortion strategy.
Almost as the Swedish Post and Telecommunications Authority decided in 2020 not to include Huawei and small Chinese company ZTE in its 5G network, Chinese officials threatened retaliation. Sweden must reverse its ban or Ericsson would suffer consequences in China, the Beijing ambassador said, and the threats continued.
The Chinese government’s decision will be painful for Ericsson. The company’s last quarterly report in July painted a curious picture: 8% growth globally, but declining sales in China. The Chinese market has accounted for around 10% of Ericsson’s sales in recent years. At around the same time, China Mobile, the country’s largest mobile network operator, announced its latest 5G contracts. Huawei won 60%, ZTE 30%. Ericsson won just 2%, up from 11% in the previous round of contracts last year, according to news reports.
Compare that with what happened to the Finnish Nokia. The Finnish Parliament passed a law in 2020 allowing certain companies to be excluded from 5G networks for national security reasons, but Finnish lawmakers did not single out Huawei or ZTE, unlike Swedish regulations. The Global Times, a media outlet run by the Communist Party of China, predicted good things for Nokia, which the newspaper said would have “more room to negotiate” entry into the Chinese 5G market. Nokia, whose technology had been seen as a little less desirable, walked away from the 2020 contract empty-handed. But this summer, he suddenly came back with a share of the stock – a 10% stake.
The lesson is obvious: resist China and your companies will be punished. Keep your head down and your businesses will be fine. Denying business to Western companies is not a violation of the law. China Mobile’s majority shareholder is a state-owned company, but the entity is theoretically private and can do business with whoever it wants.