The Digital Silk Road Initiative aims to expand the PRC’s control of global information and communications technology through the construction of digital infrastructure globally. While DSR has become a catchall for advancing the overseas activities of PRC technology companies, its objectives go beyond opening markets and expanding trade.

Implications

DSR presents risks to global markets and political stability by deploying anti-competitive practices and exerting firmer controls over global data flows.

    Issue

    Beijing’s Digital Silk Road Initiative (DSR) promotes the construction and interconnection of PRC information and communications technology globally.

      Actions

      U.S., European, and other global partners can increase coordination and action to boost competitiveness for major IT infrastructure projects and ensure data flows remain rooted in principles of openness.

        This summarizes a Pointe Bello-produced report recently released to the public.

        Download the Full PDF

        A STRATEGY FOR DIGITAL DOMINANCE

        In an April 2018 speech, General Secretary Xi Jinping made the Digital Silk Road Initiative (DSR; 数字丝绸之路) the centerpiece of a clear strategy to promote China as a leader in the global digital economy and contribute to PRC-led international cyberspace governance. The development highlights the recognition by Xi and other top PRC leaders that digital collection, movement, and control of information are essential to future economic and geostrategic power. DSR, which is a key pillar under Beijing’s “One Belt, One Road,” encompasses technologies ranging from satellite communications and smart cities to fiber optic networks and e-commerce.

        Today DSR provides PRC government and corporate entities a blueprint for aligning their activities in developed and developing economies with Beijing’s objectives. These activities can range from expanding broadband access, to upgrading digital technology and infrastructure, to broadly increasing global connectivity to the PRC. In Asia, Africa, and the Middle East, Beijing portrays DSR as leading the collaborative provision of global “public goods” by addressing legitimate digital infrastructure deficiencies.

        While rolled out under the “One Belt One Road” (OBOR; 一带一路), DSR also appears to be one of the chief tools for implementing Beijing’s Innovation Driven Development Strategy (IDDS; 创新驱动发展战略). IDDS, the keystone of the PRC’s technology policy under Xi Jinping, seeks to enshrine successful tools developed through existing PRC science and technology programs and to advance new policy guidance to more effectively channel state capital supporting the acquisition of foreign technology and the “going out” of PRC information technology companies.

        Other related national industrial strategies include the 13th Five-Year Plan on National Informatization [十三五国家信息化规划] and the National 13th Five-Year Plan for the Development of the Information and Communication Industry [信息通信行业发展计划]. The former calls for achieving systematic breakthroughs in “indigenously innovated core technologies,” while the latter promotes the integration of information and communication industries to better position PRC Internet of Things (IoT) companies to compete globally.

        HOW DSR IS BEING IMPLEMENTED

        Under the guidance of PRC government agencies and financial institutions, PRC telecommunications, Internet, and advanced technology companies—whether central state-owned enterprises (SOEs), provincial SOEs, or otherwise—serve as implementing forces in advancing DSR. The overseas activities of these entities are guided and enhanced by a growing suite of PRC government policy, diplomatic, and financial support measures, especially in key emerging markets where PRC companies are competing with Western information and communications technology (ICT) firms. Further analysis may demonstrate that the implementing forces effectively constitute a Corps of Engineers for the People’s Liberation Army (PLA).

        PRC government efforts to support DSR construction are ramping up and increasingly focused on driving progress in key sectors, such as telecommunications. PRC government agencies and financial institutions—such as the National Development Reform Commission (NDRC), China Development Bank, and the Ministry of Industry and Information (MIIT)—are introducing new policies to support PRC companies in their implementation of DSR initiatives.

        The country’s three key central state-owned telecom operators—China Telecom, China Mobile and China Unicom—play an important role in the development of OBOR by focusing on building multiple transnational land and submarine cable systems.

        Other PRC telecommunications companies are involved in ICT projects in OBOR countries and beyond. These include CITIC Telecom, HyalRoute Communications Group, Zhongtian Technology Submarine Cable Co., as well as Internet giants Baidu, Alibaba, Huawei, and ZTE.

        Beijing has also formed DSR industry alliances known as State-Industry Innovation Alliances (SIIAs) that bring together and seek to increase coordination among various stakeholders, from PRC government and military to foreign firms.

        PRC financing and construction of digital and other technical infrastructure under DSR spearheads Beijing’s offensive to export technological standards in ICT, cybersecurity, AI, robotics, smart technologies and applications, new energy technologies and explosives, power grids, and transportation systems.

        PROMOTING PRC TECH STANDARDS ADVANCES DSR

        A body of reporting indicates that at least since 2015 Beijing has aimed to promote PRC technology standards and policies as the de facto benchmark across OBOR countries in Central Asia, Southeast Asia, the Middle East, Africa, South and Central America, and even peripherally in Europe and North America. This has served not only to enable disproportionate PRC influence over international ICT regulation but also to gain advantage by increasing barriers to multinational trade and governance that will be difficult to reverse.

        As a result, the PRC’s encouragements—or requirements—that OBOR participant countries adopt PRC technical standards as part of DSR and other infrastructure projects is already altering global competition and negatively impacting the ability of non-PRC companies to compete in foreign markets.

        Proliferation of PRC standards under the OBOR rubric also paves the way for projection of PRC military power by extending the reach of Beijing’s “military-civil fusion” (MCF) programs in strategic regions.

        KNOWING AND BALANCING RISKS

        The dominant role that PRC entities have and will continue to play in DSR presents risks to global markets and political stability.

        • First, PRC companies often leverage preferential financing, thus creating anti-competitive scenarios when completing infrastructure projects overseas. Efforts to increase project transparency and identify new or creative financing options for bids by U.S., European, or other strategic partner firms could go a long way toward balancing the playing field. The new U.S. Development Finance Corporation could prove a key partner to the private sector in this regard.

        • Second, PRC-built and operated high-technology infrastructure such as fiber optic cables, navigation satellites, and smart cities likely grant Beijing firmer control over the global flow of data. This has the potential to enable PRC entities to evade U.S. and other intelligence and law enforcement, obtain sensitive proprietary information, and deny ICT access to U.S. and other users when it serves Beijing’s objectives. An important starting place would be to work with allies and partners to ensure shared understanding of the threat and find opportunities to leverage public and private sector strengths in response.

        • Third, countries that uphold interoperability for the benefit of all by facilitating commerce, for example, as the key purpose for standards could band together to invalidate standards set to serve the strategic priorities of a few.