US dangles financial carrot to push developing countries away from Chinese tech

The United States is offering loans and other financing options to ensure developing countries opt for hardware from suppliers in democratic countries instead of relying on Chinese telecom equipment. The US terms the alternatives “safer” and “with fewer strings attached.”

Bonnie Glick, the deputy administrator at the US Agency for International Development (USAID), which is spearheading the effort said the financing could be “potentially worth billions of dollars in total,” the Wall Street Journal reported.

While USAID typically provides food assistance rather than technology, this will entail dispatching staff to meet politicians and regulators in developing countries to push them away from Chinese companies such as Huawei Technologies and ZTE Corporation, Glick said.

The financing will not be direct, but through agencies such as the US International Development Finance Corp (USIDFC), which can give direct equity loans and has about half its $60 billion investment capital remaining) — for non-telecom deals and the US Export-Import Bank, a spokesman said.

Partner companies to furnish 5G equipment would include Ericsson AB (Sweden), Nokia Corporation (Finland) and Samsung Electronics (South Korea), besides smaller American companies “in the early stages of developing open-standard 5G technology,” Glick added.

The message will be two themed, according to Glick – first being that Chinese equipment is “vulnerable to espionage” and second that Chinese loans can be a debt trap to “take over control of national assets …there’s a lot of fine print”.

The Chinese government has promised countermeasures to US actions. The country’s largest international finance bank, the China Development Bank did not respond to queries, the report said.

The developments seem to be a step further into the US’ “tech Cold War with China,” the report said, noting that US President Donald Trump has waged sustained curbs against China’s tech advances signalling concern over spying and trade practices – charges that the companies and Beijing have denied.

The US has since 2018 lobbied with NATO and other allies to ban wireless 5G tech from China (successful in Britain and Poland), while Germany is still considering the move.

The biggest challenge however may be in price-sensitive Africa, where Chinese wireless equipment dominates the market. For example, Huawei and ZTE hold 50 percent and 60 percent sales share in Africa and the Middle East respectively.