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[Markets] Beijing Threatens 'Reverse Sanctions' If Huawei Excluded From Indian 5G Network

Just as relations between India and China were beginning to improve, New Delhi has found itself caught in the middle of Washington and Beijing's war over the future of 5G, according to a recent Reuters report.

Like many countries, India is just beginning the bidding process to find a provider to build out its 5G infrastructure. But thanks to rumors that New Delhi might shut Chinese telecoms giant Huawei out of the bidding process due to Washington's insistence that Huawei could present a threat to national security - making India vulnerable to espionage directed by China's Ministry of State Security - China's Foreign Ministry recently summoned Vikram Misri, India's ambassador to Beijing, to express its "concerns" about Washington's campaign to block Huawei equipment from being used in 5G networks around the world.

During the meeting, Chinese officials said they could impose "reverse sanctions" on Indian firms operating on the mainland if India doesn't allow Huawei to participate in the bidding process, according to a readout of the conversation shared with Reuters.

Neither the Indian foreign ministry nor the Chinese foreign ministry responded to Reuters' requests for comment.

Indian companies have a far smaller presence in China than in other major economies. But still, Indian companies including Infosys, TCS, Dr Reddy's Laboratories Reliance Industries and Mahindra & Mahindra operate in the manufacturing, healthcare, technology and financial services space on the mainland.

Now, the row over Huawei threatens to escalate and sour relations between the world's two most populous countries just as they were getting over their territorial disputes over Arunachal Pradesh.

India is expected to hold trials for installing its next-generation 5G cellular network in the next few months. But it has not yet decided whether it will invite the Chinese telecoms giant to participate, telecoms minister Ravi Shankar Prasad has said.

Prasad recently told parliament that six proposals have been received for 5G technology trials, including from Huawei. He didn't name the other companies, but there are only a handful of companies in the world who have the capabilities that would allow them to participate, including Finland's Nokia, Sweden's Ericcson and South Korea's Samsung.

And although India's intelligence service has been looking for evidence that Huawei could use its equipment as an embedded spy network, so far, it has found no evidence of this.

Sources from within India's government told Reuters that one solution might be using different providers for hardware and software.

Since winning re-election, Indian Prime Minister Narendra Modi has felt the brunt of the Trump Administration's protectionist bent: Like Turkey, it recently lost its special status granted by the Department of Commerce, which raised tariffs on Indian-made goods entering the US. And thanks to Modi's flirtations with Russia (it recently agreed to buy the Russia S-400 missile defense system, which could open it up to US sanctions under CAATSA), it's already in hot water with Washington.

President Xi is presently planning a visit to India in October that was intended as a sign of the improving relations between the two countries. If the dispute over Huawei continues to escalate, he could cancel. If that happens, the dispute over Huawei will officially have gone international.

Published:8/6/2019 11:00:44 PM
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