India announced in August that it will once again allow Chinese telecommunications equipment providers to sell into its domestic market. The country imposed anti-dumping duties on Chinese telecom imports in 2009, and then effectively blocked imports due to security concerns by Indian intelligence.
Those concerns are reasonable: Huawei in particular is widely suspected to have close ties with the Chinese intelligence apparatus and stands accused of serial commercial espionage. And India has cause to be nervous. An April report by a Canada-based internet security consultancy alleged that hackers in Sichuan penetrated a swath of sensitive Indian servers.
With this in mind, the new Indian policy has a significant caveat: As WTO rules prevent India from singling out China, all foreign firms supplying "core" telecommunications equipment must submit their source code to the Indian government.
Chinese telecom companies are already complaining about India’s onerous security requirements, and state media has accused New Delhi of using security as a pretext for protectionism. If true, this new policy would be straight out of Beijing’s playbook.
But it is not true – at least not in this case. The policy isn’t a serious barrier to trade, and will do little to block Chinese entry or to protect India’s telecom companies. Chinese firms are being allowed back in because the Westerners are too expensive, the domestic industry isn’t up to the job, and New Delhi can’t wait.
The source code issue should be taken at face value. Even if the government were to show foreign code to domestic manufacturers, it would solve none of the problems of India’s telecom manufacturing sector. India can program routers, but it lags in the capacity to design and manufacture the hardware.
And unlike office software or encryption keys, telecom equipment code is specific to the machines it manages. Chinese code can’t be used in Indian routers. Even if it could, Chinese companies don’t compete on software sophistication, but on price and speed of delivery.
For now, Chinese telecom equipment providers can look forward to a new wave of Indian orders. At the same time, while griping about "protectionism" is unjustified, there is little cause for complacency. There are rumors that Huawei has already quietly promised to increase investment in India in exchange for contracts. Now that is taking a page from China’s playbook.