China is reportedly weighing retaliatory measures against Ericsson and Nokia if the European Union’s member states ban Huawei’s equipment from their respective networks. The perceived threat follows last week’s decision by the U.K. government to ban and require the removal of Huawei’s equipment from its networks by 2027. 

Chinese government officials may impose bans against the export of Ericsson and Nokia equipment sourced in China if more European countries follow the lead of the U.S. and U.K. in barring Chinese equipment, according to The Wall Street Journal.

“It’s a threat and an escalation,” said Roger Entner, founder and lead analyst at Recon Analytics. “The mistake that China is making is that the logic of the hawks is if China is behaving like this when it’s not deeply integrated into the communications network, which is the heart of modern economies, how will they behave when it is at the heart of a modern economy?”

China is “now showing exactly the behavior that they’re being accused of,” he said. “This conduct is certainly counterproductive. It is the heavy-handed, bully-type behavior that China always denies it’s doing and it’s always been accused of, and now it’s doing it.”

This level of political influence being exerted around telecommunications infrastructure is uncharted, according to Patrick Filkins, senior research analyst at IDC. “Realistically, nothing is off the table at this point,” he said. 

Huawei and ZTE generate the majority of their revenue from domestic sales in China, and the companies can withstand some loss of market share outside of China — but not all of it, Filkins said. “China may be reaching a point where it needs to be more aggressive about defending its vendor install base, particularly in Europe.”

Will Townsend, senior analyst at Moor Insights & Strategy, characterized the report as “some chest thumping on the part of the Chinese government,” adding that China “would have to propose legitimate concerns to do this and Nokia and Ericsson could likely easily pivot to South Korea or Japan to keep production in Asia.”

While the Chinese government could limit the exportation of equipment from local factories owned or controlled by Ericsson and Nokia, "there aren't that many, and the vendors could probably take up the slack elsewhere," said Matt Walker, chief analyst and CEO at MTN Consulting.

China could also "coerce Chinese state-controlled carriers to cancel or cut back their recently announced contracts with Ericsson and/or Nokia," Walker said. "That would be relatively easy to do. The Chinese telcos wouldn't like it, as they have never wanted to have local gear forced on them — they want competition among suppliers just as much as anyone."

The likelihood of other European countries banning Huawei depends on China’s conduct, Entner said. “If China would play this much cooler and frame itself as the victim, it might have a lot better chances.”

It’s difficult to ascertain where European bans against Chinese radio access network (RAN) equipment might stick, and where those vendors will continue to sell, Filkins said. “What is clear is they are likely out of the core networks business in the majority of Europe, but may continue to deliver RAN kit in select countries.”

The EU earlier this year declined to take a definitive stance against Huawei and opted to leave lingering national security questions to its 27 member states. 

Townsend believes the EU will maintain that position, leaving the decision to individual countries, because “it’s not a trivial exercise to rip and replace existing Huawei LTE infrastructure.” Since most of the 5G deployments in Europe to date have been focused on the RAN in non-standalone mode, it would be easier for European operators to pivot to other vendors for base stations, he explained.