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China holds German car companies hostage in the 5G battle

Snacks / Friday, January 17, 2020

To build or not to build... a Huawei-powered 5G network. That's what Germany's asking itself — China just threatened "consequences" if Germany doesn't partner with the Chinese-owned tech giant Huawei to build its 5G future. Some context:

  • Germany is big on cars (think Volkswagens, BMWs, Mercedes).
  • And the German brands sell more cars to China than anywhere else on earth.
  • But the US is pressuring Germany to not work with Huawei.
  • Now China's threatening to hit Germany's car industry if this Huawei deal gets frozen out.

Feeling the pressure... The US is leaning on Europe to avoid Huawei — it's worried the tech company is acting like a Chinese gov spy on American/Euro communications (so it's threatening fresh tariffs). But now that China's pressuring Germany's prized auto industry, German chancellor Angela Merkel faces an even tougher decision: US or China.

Between a rock and China... Despite the influence of US pressure, the global economy is also heavily dependent on China: (cough, 1.5B people and the world's 2nd largest economy, cough). China's increasingly using that size to pressure not just industries, but entire countries. Here's where else we see it:

  • Big Hollywood studios often won't produce movies critical of China — The last Avengers brought in $614M in China alone.
  • British soccer team Arsenal distanced itself from a player who was critical of China’s treatment of Muslims.
  • And over in hospitality, airlines and Marriott hotels have apologized (profusely) for listing Taiwan as a separate country.
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