A report by the Superior Council for Cyberspace Security (CSSC) concluded that Chinese giants ZTE and Huawei are not welcome in Portuguese 5G. Experts consulted by PLATAFORMA admit retaliation by China, and ask the Portuguese Government to be clear in its position regarding Chinese investment
João Pedro Pereira, executive president of PORCHAM, says that the relationship between both countries, which is 500 years old, “is mature, from a diplomatic point of view, in the economic chapter and in the cultural area”, stressing that the Government of António Costa will have to explain this type of decisions, if, in fact, they move in this direction.
“China’s investments in Portugal have had positive returns for investors, as well as for the Portuguese companies that received these investments. They are not loss-making companies, on the contrary, they are highly profitable and have been strengthened by the presence of these new shareholders. As the new executive president of the Sino-Portuguese Chamber of Commerce and Industry, an entity governed by Chinese law, and having held a road-show in China with various events about Portugal as an investment destination, as well as visits to businessmen in the main and most populous Chinese cities , what I can say is that the appetite for investment in Portugal remains high, and that our country is seen as a safe and reliable investment destination. I believe that the Portuguese Government must invest in a clear and precise communication strategy, and I believe it is time for a member of the Portuguese Government to travel to China and explain the context of certain decisions, such as the end of gold visas or this decision on 5G ”, stresses João Pedro Pereira, who admits that he has already been confronted with the fact that in Portugal, eventually, Chinese investment is turning up its nose.
“In the meetings I held in China with various investment decision-makers, I was faced with the question of whether Portugal was still interested in foreign investment, and whether it was not closing itself off to Chinese investment, due to the end of the golden visas. I had to explain the context, that this does not mean closing Portugal to foreign investment at all. There was a perception by the Government that the program was inflating the price of housing and that access to housing for young people was increasingly difficult. Now, I believe that the Portuguese Government’s communication should take care to explain the reasons for the decisions abroad, so that Portugal does not give an image that it is closing itself off to foreign investment, and more specifically that from China. As for Huawei, and the decision taken, I believe that they may reduce the bet and investment in Portugal. I would not interpret it as retaliation, but rather as a reduction in commercial intervention in the face of the exclusion of 5G ”, he points out.
If the Portuguese State fully moves forward with the exclusion of Huawei, ZTE or other Chinese companies from the 5G network, it will be a major turnaround compared to previous political attitudesJosé Pedro Teixeira, Portuguese expert
in international relations
In turn, José Pedro Teixeira Fernandes, a Portuguese specialist in international relations, goes further, criticizing the options of the Portuguese Government, even mentioning that there is some lack of coherence in the decisions.
“If the Portuguese State fully moves forward with the exclusion of Huawei, ZTE or other Chinese companies from the 5G network, it will be a big turnaround compared to previous political attitudes. (Of course, it could also be argued that the international context has changed due to the war in Ukraine). It is enough to remember that, still in 2018, at the time of the visit of the Chinese President, Xi Jinping, the tone was completely different with the same Prime Minister (António Costa) in the Government of Portugal. At the time, multiple cooperation and investment agreements were signed with China. For example, Altice — one of the three telecommunications operators in Portugal — signed an agreement with Huawei for the development of 5G technology that aimed precisely at “accelerating the development and capacity building of the 5G network in Portugal, in order to allow a qualitative increase in the access to the mobile broadband network and more reliable communications”. All of this was done with government knowledge and encouragement. Thus, Portugal does not seem to have a coherent, well-structured and long-term policy towards China, it seems to navigate in short-term circumstances, without a consistent and broad strategic vision”, says the researcher, who is not surprised by possible ‘retaliations ‘ by China.
“If progress is made towards effectively banning Chinese companies from the 5G network — there is talk of a period of 5 years for this purpose — there will most likely be a negative reaction from China. The Chinese reaction can take various forms, from diplomatic protest, to judicial challenge in the courts, naturally also reaching economic-business retaliation (which can be withdrawal of investment, making it difficult for Portuguese companies to access the Chinese market, or others)”, he says, also referring that the Government of Xi Jinping could use the fact that Portugal is economically dependent on a country like China.
“It should be noted that China is an important investor in Portugal, having acquired positions of dominance or of great importance in companies ranging from the financial sector to the health sector, passing through the media to the energy sector. According to data published by the Bank of Portugal last year, Chinese companies generated the fifth highest amount of foreign direct investment in Portugal. There are, therefore, political and economic vulnerabilities of the country in this situation, which China can exploit in a logic of retaliatory geoeconomic weapon”, he says, also criticizing the exposure that Portugal has had towards China in recent years.
“However, none of this is a surprise, as this problem has been brewing for a decade due to the growing China-US competition for world supremacy. What happens is that the Portuguese governments until now had ignored it, as if the country had a special position under Sino-American tensions and commitments with the USA, NATO or EU. The degree of exposure in investment that Portugal acquired vis-à-vis China in the critical infrastructure sectors was a strategic error (in the rest, the issue is minor and does not have that impact), of which we are now seeing the consequences, whether major or minor. ”, he concludes.
In the meetings I held in China with various investment decision-makers, I was confronted with the question as to whether Portugal was still interested in foreign investmentJoão Pedro Pereira, executive president of
The secretary general of the Luso-Chinese Chamber of Commerce and Industry (CCILC), Bernardo Mendia, warns that this issue has a “negative effect on other investors, consequences on the development of Portugal and on the excellent relations between Portugal and the People’s Republic from China”. The CCILC also proposes listening to stakeholders and “not imposing restrictions on Huawei’s activity indiscriminately”.
“This is an artificial restriction of competition based on discrimination”, he reiterates, to ECO, stressing that “if it were not so, the process would be sufficiently transparent, based on dialogue and led by telecommunications technicians”.
João Pedro Pereira says that, “taking into account the centuries-old relationship between the two countries, I do not believe that a bilateral relationship like this is subject to ‘retaliation’”. “It is necessary to demystify this issue, the decision not to rely on Huawei for 5G has to do with the indications of the multilateral organizations to which Portugal belongs. From the outset the European Union, NATO and the OECD. This is not, in my view, a transfer by Portugal to the USA. But a decision in a multilateral context that Portugal is part of”, he recalls, stressing that, despite this decision, Portugal’s ‘bet’ in China will continue.
“Due to the contact I have with Portuguese businessmen and political decision-makers, I have never been shown to be disinterested in Chinese technologies, on the contrary, there is a lot of interest in what has been developed in China in terms of electric mobility, robotisation of industrial processes, hardware technology for information technology, etc”, says the president of PORCHAM, believing that commercial relations will continue.
“It is not China’s or Portugal’s tradition to let a commercial aspect interfere in the centuries-old political and diplomatic relations between the two countries”, he stresses. “China is the fourth largest foreign direct investor in Portugal. According to the recent visit to Portugal by the Chinese vice-president, Han Zheng, there is an intention to strengthen relations. China is the fourth largest seller of goods to Portugal, having surpassed the Netherlands, and wants to gain weight in exports. Tourism, for example, will be one of the levers in a plan that reaches one million tourists a year within four years”, he concludes.
Macau as a possible mediator?
China’s relations with Portugal also go through the history of these two countries with Macau, formerly a Portuguese colony. In the midst of this ‘technological war’, we questioned João Pedro Pereira about whether the Macao SAR Government could serve as a mediator in this possible conflict.
“Macao’s contribution is permanent, first of all because it is the gateway that Portugal knows best”, said the leader of PORCHAM.
Jorge Neto Valente, president of the Sino-Lusóphone Association of Industry and Cultural Exchange Promotion, believes that bilateral trade should not be immediately affected by the decision. In his opinion, the 5G situation, “in a perverse way, even raises the importance of Macau as the best place for commercial intermediation between companies from both countries; and the most suitable place to avoid misunderstandings between the two cultures.”
More expensive communications
If you definitely move towards this solution, removing Huawei, Portugal risks having more expensive and lower quality communications. This is the opinion of economic expert Steffen Hoernig, professor at Nova SBE.
“It does not seem to me that [the decision] takes into account the immediate costs for the country, but it takes into account the expected benefits of reducing the possibility of espionage by the Chinese government, which are not counted in euros. Will it make a difference? Nobody knows. Someone will have to pay and it won’t be the government, I presume”, opines the specialist in statements to Dinheiro Vivo, supported by his colleague Rui Aguiar, professor and researcher at the University of Aveiro.
“Ericsson, Huawei and Nokia are the big three providers in communications – there are others too but they are much smaller. Basically, we have a tripoly. In each country, operators compete to lower supply prices. To move from a tripolio to a duopoly is to deeply cut the negotiation capacity – on top of that, we are removing the manufacturer that tends to have the best cost-quality ratio. So costs for operators will go up.”