Posts Tagged ‘5G’

Huawei mistrust imperils China tech ambitions

December 11, 2018

China’s ambitious drive to dominate next-generation 5G technology faces a sudden reality check as fears spread that telecom companies like Huawei could be proxies for Beijing’s intrusive security apparatus.

Fifth-generation mobile communications are the next milestone in the digital revolution, bringing near-instantaneous connectivity and vast data capacity.

They will enable the widespread adoption of futuristic technologies such as artificial intelligence and automated cars and factories — advances China is desperate to lead.

Analysts say mounting concern over Huawei imperils its lead over the market

Analysts say mounting concern over Huawei imperils its lead over the market Analysts say mounting concern over Huawei imperils its lead over the market AFP/File

With 5G’s rollout expected to gain pace in coming years, the race to dominate standards and control security and data traffic underpins much of the current high-tech rivalry between the United States and China, technology experts said.

Huawei’s status as a leading world supplier of the backbone equipment for telecoms systems — mostly in developing markets — gives China an inside track.

But analysts said mounting concern over Huawei imperils that lead.

“This is a big threat because if Huawei loses access to lucrative Western markets, this will impact its ability to grow and finance R&D,” said Paul Triolo, a global technology policy expert with risk consultancy Eurasia Group.

It also could hinder the deployment of 5G networks in China, which are “a key piece of China’s overall effort to upgrade its industrial base”, he added.

The US defence establishment fears China’s dominance of critical 5G infrastructure could enable it to disrupt American military communications or otherwise wage asymmetrical warfare in a confrontation.

Triolo warned of potentially disastrous fallout for China if US law-enforcement efforts — in the spotlight after the arrest of Huawei executive Meng Wanzhou in Canada — result in a ban on sales of US chips and other vital technology to Huawei.

“This could be catastrophic for China’s tech ambitions, threatening (Huawei) itself, supporting industries, and future development,” he said.

– Burglar with a key –

New Zealand recently joined Australia and the US in essentially barring use of Huawei equipment in domestic networks. Following Meng’s arrest on December 1, similar sentiments have arisen from Tokyo to Brussels.

On Monday, Kyodo news agency reported Japan’s top three telecom companies would forego equipment from Huawei and another big Chinese player, ZTE.

US officials and lawmakers have long expressed concern that China could use its tech firms to steal trade secrets — accusations Chinese foreign ministry spokesman Lu Kang dismissed on Monday as “ridiculous.”

“These people do not provide a single (piece of) evidence to show how Huawei affects their national security,” Lu said.

Distrust of Huawei stems in part from the background of founder Ren Zhengfei, a 74-year-old former People’s Liberation Army engineer.

The US has already put the squeeze on ZTE, which faced insolvency earlier this year after the Trump administration temporarily banned American companies from selling it vital components.

Huawei has secured many leading 5G patents and supplied networking equipment for telecom systems around the world that will inevitably carry huge amounts of US data, putting that information at potential risk.

“One way to envision (the threat) is to imagine the person who built your house decides to burgle it,” James Lewis, a technology policy expert at the Center for Strategic and International Studies, wrote in an analysis last week.

“They know the layout, power system, access points, (and) may have kept a key.”

– ‘We don’t like it’ –

But US firms like Intel and Qualcomm produce the advanced chips critical for 5G, giving Washington huge sway over Huawei, which depends heavily on those technologies.

If the US cuts off Huawei’s chip supply and further isolates the company, the blow “will be huge, bigger than ZTE”, said Shi Yinhong, an expert on China-US relations at Beijing’s Renmin University.

“If Huawei is hit hard, China will lose its 5G lead.”

China observers say President Xi Jinping’s more assertive global stance bears much of the blame for Huawei’s troubles.

Late leader Deng Xiaoping famously observed that China’s strategy should be to “hide your strength, bide your time”, to avoid triggering a crippling foreign backlash.

But Xi has dumped that, accumulating one-man power, scrapping term limits and openly declaring China’s ambition to become a high-tech power.

Beijing also passed a law in 2015 obliging its corporations to aid the government on matters of national security.

These moves have sparked alarm in the West, and the US has accused Chinese entities of massive cyber-attacks.

“One of the biggest criticisms of Xi in China is: ‘did he take the stage too fast, did he try to push Chinese power too soon?'” said Christopher Balding, a China expert at Fulbright University in Saigon.

“He has behaved as near-totalitarian and is acting similarly internationally and people are saying ‘we don’t like it.'”

AFP

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Germany Is Soft on Chinese Spying

December 10, 2018

Huawei has deep ties to the Chinese government. Berlin might let it build the country’s next generation of communications infrastructure anyway.

The logo of Chinese electronics company Huawei on Sept. 2, 2015 in Berlin. (John Macdougal/AFP/Getty Images)

The logo of Chinese electronics company Huawei on Sept. 2, 2015 in Berlin. (John Macdougal/AFP/Getty Images)

Last week, New Zealand decided to exclude the Chinese technology company Huawei from providing equipment to operate its 5G high-speed mobile network due to “significant national security risks.” The country follows Australia and the United States, which have also excluded Chinese companies from supplying 5G infrastructure.

In Germany, meanwhile, security has so far hardly played any role in the debate over the fifth generation of cellular technology. In the terms of reference published last week by the German Federal Network Agency for its 5G auction, security was not even included in the conditions for awarding the contract. In October, the government announced: “A concrete legal basis for the complete or partial exclusion of particular suppliers of 5G infrastructure in Germany does not exist and is not planned.”

That is dangerously misguided. As Australia’s intelligence chief has pointed out: “5G is not just fast data, it is also high-density connection of devices—human to human, human to machine and machine to machine.” 5G will carry communications we “rely on every day, from our health systems … to self-driving cars and through to the operation of our power and water supply.” 5G will be the backbone of our industries and societies. “Critical infrastructure” hardly gets more critical. And the security risks are accordingly high. Wherever Chinese technology companies supply 5G infrastructure, they will have access to huge volumes of sensitive data and industrial secrets—and there’s reason to think they would eventually be forced to spy on behalf of Beijing. The Chinese government could also use these companies to disrupt other countries’ infrastructure in a future conflict.

Given the massive cybersecurity and national security risks, the only responsible decision is for Berlin to follow the Australian, New Zealand, and U.S. lead and ban Chinese providers from the German 5G network. In doing so, Europe’s strongest economy would send a crucial signal to the rest of the European Union members that are grappling with the same decision.

Contrary to Huawei’s claims, the decisions by Australia, New Zealand, and the United States were not motivated by crude protectionism. In none of these three countries will domestic suppliers be the primary beneficiaries. The anomaly of the 5G market is that there is no leading U.S.-based supplier covering the full technological spectrum. The companies profiting from a ban on Huawei and ZTE are mainly two European companies: Nokia and Ericsson.

Still, those calling for banning Huawei face an uphill battle across Europe. Huawei has strong supporters (not least due to its very professional lobbying operation and deep ties within the political scene). It markets itself as a private company, which is organized as a cooperative and is in no way under the control of the Chinese state. Network operators such as Deutsche Telekom are among Huawei’s cheerleaders. Deutsche Telekom warns against excluding “high-performance suppliers” such as Huawei if the country wanted to build its 5G network quickly and at cost. Huawei already supplies much of the existing German 3G and 4G infrastructure.

For Deutsche Telekom and other network operators, the situation is clear: Huawei offers innovative and reliable products at highly competitive prices. Legally, Deutsche Telekom does not bear any liability for the security risks associated with Huawei technology. And the company does not care about the fact that Huawei’s price advantage is the result of a highly skewed playing field in China. In the world’s largest market, domestic providers control 75 percent of the market, giving them unbeatable economies of scale.

Remarkably, Huawei’s defenders also include the Federal Office for Information Security (BSI), Germany’s cybersecurity agency. Its president, Arne Schönbohm, believes the agency has the capabilities to check on whether suppliers meet security requirements, providing “technically substantiated statements of trust.” Huawei, for its part, describes itself as “the most audited company in the world.” The company offers to put its equipment through any inspection in testing centers jointly run with governments. Last month, they put one such center into operation in Bonn in cooperation with the BSI. Schönbohm was enthusiastic: “We welcome the opening of this laboratory, which enables a further and deeper technical exchange between Huawei and the BSI.”

His ebullience is misguided. The Bonn center follows the British model, where the Huawei Cyber Security Evaluation Centre has existed since 2010 controlled by the British intelligence service GCHQ, among others. Yet just this year, the British inspection report could give “only limited assurance” that Huawei products do not pose any risks to national security. This prompted the government to warn network operators that current rules could be changed and that certain suppliers (i.e., Huawei) could be excluded. Speaking about building Britain’s 5G network, just this week MI6 chief Alex Younger said the UK needs to take decision on “the extent to which we are going to be comfortable with Chinese ownership of these technologies.”

The final British decision is still pending, but the conclusion for Germany should be clear. If the British GCHQ, which is technically far superior to the German BSI, cannot issue a clean bill of health for Huawei, we don’t have to wait for the BSI’s own efforts. In the future, the testing centers will be in an even worse position. Checking for possible hardware backdoors will only be a small part of the job. Virtualization (and related software) will play a central role for 5G. And with weekly software updates, infrastructure operators will have a front door to compromise systems. No testing center would be able to check weekly software updates in advance.

For good reasons, the German intelligence services, unlike the BSI, take a far more critical view of the Huawei risk. They share the Australian intelligence community’s negative assessment, which, according to anonymously sourced reports in November, is based on at least one case of Chinese intelligence agents using Huawei employees to obtain access codes for a foreign network.

Source:https://foreignpolicy.com/2018/12/09/germany-is-soft-on-chinese-spying/

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Japan’s top three telcos to shun Huawei, ZTE network equipment: Kyodo

December 10, 2018

Japan’s big three telecom operators plan not to use current equipment and upcoming fifth-generation (5G) gear from China’s Huawei Technologies Co Ltd [HWT.UL] and ZTE Corp (0763.HK) (000063.SZ), Kyodo News reported on Monday.

The news, for which Kyodo did not cite sources, comes at a time of heightened scrutiny of Chinese tech firms by Washington and some prominent allies over ties to the Chinese government, driven by concerns they could be used by Beijing for spying.

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Last week sources told Reuters that Japan planned to ban government purchases of equipment from Huawei and ZTE to ensure strength in its defenses against intelligence leaks and cyber attacks.

A SoftBank Group Corp (9984.T) spokesman said Japan’s third-largest telco was closely watching government policy and is continuing to consider its options. The amount of equipment in use from Chinese makers “is relatively small”, he said.

The country’s top two telecommunications operators, NTT Docomo Inc (9437.T) and KDDI Corp (9433.T), said the firms had not made any decision yet.

Docomo does not use Huawei or ZTE network equipment, but it has partnered with Huawei on 5G trials. KDDI also does not use Huawei equipment in its “core” network, a spokeswoman said, adding it does not use any ZTE network equipment.

Huawei did not respond to Reuters request for comment, while ZTE declined to comment.

Huawei has already been locked out of the U.S. market, and Australia and New Zealand have blocked it from building 5G networks amid concerns of its possible links with China’s government. Huawei has said Beijing has no influence over it.

Japan’s decision to keep it out would be another setback for Huawei, whose chief financial officer was recently arrested by Canadian officials for extradition to the United States.

World financial markets have been roiled since news of the arrest, on worries it could reignite a Sino-U.S. trade row that was only just showing signs of easing.

Shares of SoftBank, which has the deepest relationship with Huawei among the big Japanese telcos, fell the most among the three top Japanese telcos on Monday, ending down 3.5 percent.

Industry sources said SoftBank would find it difficult to replace pre-existing Huawei network equipment that is designed for the company and not easily interchangable.

Docomo and KDDI shares fell around 1 percent, in a wider market .N225 that closed down 2 percent.

Earlier, SoftBank’s Japanese telecoms unit priced its IPO at an indicated 1,500 yen ($13.31) per share and said it will sell an extra 160 million shares to meet solid demand, raising about $23.5 billion in Japan’s biggest-ever IPO.

Reporting by Sam Nussey, Makiko Yamazaki and Yoshiyasu Shida; Editing by Christopher Cushing and Himani Sarkar

Reuters

Silicon Valley Helped Build Huawei. Washington Could Dismantle It.

December 9, 2018

The arrest of Meng Wanzhou has raised the stakes for Huawei and its overseas partners

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Huawei consumer business group’s chief executive Richard Yu presents the new phone Huawei P10 Plus at the Mobile World Congress in Barcelona, Spain. (AP Photo/Manu Fernandez)

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American companies have been crucial in helping Huawei Technologies Co. become the world’s dominant telecommunications player.

Silicon Valley giants from Intel Corp. INTC -4.40% to Broadcom Inc. and Qualcomm Inc.QCOM -1.96% are top suppliers of Huawei, which buys their components to make equipment such as base stations and routers and Huawei mobile phones. By one estimate, Huawei will buy up to $10 billion of components from American companies this year—roughly the value of China’s automobile imports from the U.S.

Qualcomm and Intel are also working with Huawei on its development of next-generation 5G technologies, a field in which the Chinese company’s aim to be a global leader has alarmed some in Washington.

These interdependencies show how any U.S. actions against Huawei for alleged sanctions violations, which could go as far as a ban on it buying from American suppliers, could devastate Huawei’s operations, and curtail business for U.S. tech companies. Huawei’s chief financial officer, Meng Wanzhou, was arrested in Vancouver on Dec. 1 at the behest of U.S. authorities investigating fraud related to sales to Iran.

Market LeaderHuawei has steadily gained market sharefrom rivals.Telecom-equipment market shareSource: Dell’Oro GroupNote: 2018 through the third quarter; figures includebusinesses of defunct companies acquired by Nokia(Siemens and Alcatel-Lucent) and Ericsson (Nortel)
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Image result for Broadcom, photos

The arrest raised the stakes for Huawei and its overseas partners and has cast a pall over trade negotiations between the world’s two largest economies. Shares of tech companies in China and the U.S. have already slumped this year as fears rise that trade tensions will disrupt business across the Pacific.

In the wake of Ms. Meng’s arrest, Huawei has sought to reassure its suppliers. In a memo dated Dec. 6 and viewed by The Wall Street Journal, Huawei said it knew of no wrongdoing by Ms. Meng and it is “unreasonable of the U.S. government to use these sorts of approaches to exert pressure on a business entity.” Huawei’s partnerships with global suppliers wouldn’t change, it said.

China Huawei Filiale in Beijing (picture-alliance/AP Photo/Ng Han Guan)

If the U.S. concludes Huawei evaded U.S. sanctions, further actions could follow. Huawei’s chief Chinese rival, ZTE Corp. , was originally slapped with a fine after it admitted to evading U.S. sanctions, but subsequent violations of its settlement agreement led the U.S. government to temporarily ban American companies from selling it products—sending ZTE to the brink of collapse. Authorities imposed a similar ban on Chinese chip maker Fujian Jinhua Integrated Circuit Co. in October, citing national-security and economic concerns.

U.S. companies stand to lose too, with China being the second-biggest buyer of its $58.4 billion of semiconductor exports last year, according to the U.S. International Trade Administration. Huawei alone is on track to buy about $10 billion of components from U.S. companies this year, up from $8 billion in 2017, estimates Handel Jones, chief executive of technology consulting firm International Business Strategies Inc., which tracks China’s high-tech sector.

“It’s a pretty extensive list of companies that would be heavily impacted” if Huawei were to lose access to its American suppliers, Mr. Jones said. ”It would be a very serious situation.”

Huawei is by far the biggest-spending Chinese tech company when it comes to research and development. It has an in-house chip-design unit that is the seventh largest in the world. It is working on high-end chips for artificial intelligence, and its chips are increasingly displacing foreign suppliers in its smartphones: Only 7% of the semiconductors inside Huawei’s top-of-the-line P20 Pro are from American suppliers, according to ABI Research, compared with 60% in ZTE’s high-end Axon M device.

Yet Huawei still relies on imports from U.S. chip companies such as Broadcom, Xilinx Inc. and Analog Devices Inc. for components used in its telecom equipment, according to a breakdown of its suppliers by investment bank Jefferies. Huawei buys equipment from data-storage equipment maker Seagate Technology PLC for use in its enterprise business, and uses memory chips made by Micron Technology Inc. in its smartphones, the bank said.

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A Xilinx spokeswoman said the company “is aware of the situation and is monitoring it closely.” The other suppliers either declined to comment or didn’t respond to requests for comment.

It’s a pretty extensive list of companies that would be heavily impacted.

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Intel and Qualcomm, which draw huge revenue from China, are seen by Huawei as more than suppliers. In Huawei’s annual report, Intel is described as a “strategic partner,” and the companies work together in a range of areas, including next-generation 5G technology.

On Dec. 5, Huawei announced it had completed a test of key 5G technology using Intel processors and a Huawei base station. In September, Huawei credited help from Intel as it made its first phone call on a type of 5G network.

Intel declined to comment.

Image result for qualcomm, chips, photos

Qualcomm has also been a collaborator in 5G. Earlier this year, the San Diego chip maker said it supplied prototype equipment used in a 5G test by Huawei. In 2015, Qualcomm, Huawei and China’s largest chip maker, Semiconductor Manufacturing International Corp. , launched a joint venture in Shanghai to work on next-generation chip technology.

Fears about Huawei’s dominance in 5G technology were behind the U.S.’s decision to scuttle the takeover of Qualcomm by Broadcom earlier this year. Both companies declined to comment.

Write to Dan Strumpf at daniel.strumpf@wsj.com

https://www.wsj.com/articles/silicon-valley-helped-build-huawei-washington-could-dismantle-it-1544358603

Will Arrest Of Huawei Exec Meng Wanzhou Derail U.S.-China Trade Talks — Trump Says “No”

December 9, 2018

China has ratcheted up the pressure on Canada to release the detained executive of Huawei Technologies over the weekend by threatening “grave consequences”

China critical of US side’s unilateral hegemonic behaviour — “This is a dilemma, and it is difficult to predict what will happen.”

Donald Trump Upbeat On China Talks; Aides Downplay Huawei Arrest Friction

Donald Trump Upbeat On China Talks; Aides Downplay Huawei Arrest Friction

“China talks are going very well,” Donald Trump said on Twitter, without providing any details (File)

WASHINGTON: U.S. President Donald Trump sounded an optimistic note about trade negotiations with China as two of his top economic advisers downplayed friction from the arrest of a senior executive of Chinese telecom equipment maker Huawei Technologies.

“China talks are going very well,” Trump said on Twitter, without providing any details.

Major companies have expressed concerns about how the arrest of Huawei Chief Financial Officer Meng Wanzhou in Canada at the request of U.S. authorities would affect U.S.-China relations or that it would cause a potential backlash against American firms operating in China.

Photographer: Lluis Gene/AFP/Getty Images

Meng, 46, the daughter of Huawei’s founder, appeared in a Vancouver court for a bail hearing as she awaits possible extradition to the United States in the investigation of whether Huawei violated U.S. sanctions against Iran.

Image result for Xi Jinping and Huawei founder Ren Zhengfei, photos

Photo: Xi Jinping and Huawei founder Ren Zhengfei

Larry Kudlow, director of the White House’s National Economic Council, told CNBC he did not believe Meng’s arrest would “spill over” into the talks with China aimed at increasing Beijing’s purchases of U.S. farm and energy commodities, lowering Chinese tariffs and making sweeping changes to China’s policies on intellectual property and technology transfers.

Kudlow said the investigation of whether Huawei violated U.S. sanctions against Iran was on a “separate track” from the trade talks and was a matter of national security and U.S. law.

“You can’t break the law. You break the American law, you break the Canadian law, you’ve got to pay the consequences of that,” Kudlow said of the Huawei case. “That was the case with other companies, and will continue to be the case. These are issues of national security.”

Continued concerns over U.S.-China trade relations caused stocks to sell off on Friday, with technology shares leading the decline. The Nasdaq Composite fell 2.4 percent, with the Dow Jones Industrial Average falling 2.1 percent and the S&P 500 index down 1.9 percent in afternoon trade.

White House trade adviser Peter Navarro told CNN that the U.S.-China trade talks and the Huawei arrest “are two separate events,” calling the timing of Meng’s arrest a coincidence.

Navarro said the arrest was the result of “the bad actions of Huawei,” adding there was a “frightening” risk that the Chinese government could use the company’s products for spying.

“The timing was unusual, but the actions were legitimate.”

Asked if the United States would walk away from trade talks if U.S.-China differences were not resolved in 90 days, Navaro said: “It’s not a question of walking away. It’s a question of moving forward on the strategy, which is to simply raise the tariffs” on Chinese goods.

Kudlow expressed optimism that the United States and China will make substantial progress during the 90-day period allocated for talks, ending around March 1.

“I think there will be a lot of success in the next 90 days; President has indicated, that if there’s good solid movement and there’s good action, he might – he might – be willing to extend the 90 days,” Kudlow told CNBC.

He reiterated that the Trump administration was expecting immediate movement from China on purchases of agricultural commodities and energy and added that he expected Chinese autos tariffs to be reduced. He said it was a positive sign that China was willing to discuss core issues related to intellectual property theft, forced technology transfers and computer hacking of U.S. companies.

However, Kudlow said U.S. Trade Representative Robert Lighthizer, who will lead the American side in the talks, will be looking to ensure that any agreements can be fully enforced and monitored to ensure follow-through by Beijing.

Huawei CFO Meng Wanzhou (picture-alliance/dpa/M. Shipenkov)

The chief financial officer Meng Wanzhou of China’s Huawei Technologies

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Beijing escalates dispute over arrest of Sabrina Meng Wanzhou by lodging diplomatic protest

  • China official Xinhua news agency attacks Canadian PM Justin Trudeau for not telling Beijing in advance and ‘letting this nasty thing happen’
PUBLISHED : Sunday, 09 December, 2018, 12:01pm
UPDATED : Sunday, 09 December, 2018, 1:12pm
China has ratcheted up the pressure on Canada to release the detained executive of Huawei Technologies over the weekend by threatening “grave consequences” and accusing Canada of “hurting the feelings of the Chinese people”, escalating the case into one of the worst diplomatic rows between Beijing and Ottawa.

Chinese foreign vice-minister Le Yucheng on Saturday summoned Canadian ambassador John McCallum to lodge a “strong protest” against the arrest of Sabrina Meng Wanzhou in Vancouver and urged Ottawa to release Meng immediately, according to a brief foreign ministry statement.

Meng, the chief financial officer at Huawei and a daughter of the Chinese telecom giant’s founder, was arrested in Vancouver on December 1 and faces extradition to the United States, which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran in defiance of sanctions.

The arrest of Meng in Canada, which took place on the same night that Chinese President Xi Jinping and US President Donald Trump dined together in Buenos Aires, has infuriated Beijing.

The official Xinhua news agency published an editorial on Sunday morning condemning the arrest as an “extremely nasty” act that had caused “serious damage to Sino-Canada relations”.

“According to the words of the Canadian leader, he had known of the action in advance,” Xinhua said, referring to the fact that Canadian Prime Minister Justin Trudeau – whom it did not did name directly – had a few days’ notice of the arrest.

“But he didn’t notify the Chinese side. Instead, he let this kind of nasty thing to happen and assisted the US side’s unilateral hegemonic behaviour – this has hurt the feeling of Chinese people,” Xinhua added.

Huawei exec Meng Wanzhou

The last time that Beijing called Canada of hurting the feelings of the Chinese people was more than a decade earlier in 2007 when the then prime minister Stephen Harper hosted the Dalai Lama.

People’s Daily, the mouthpiece of the ruling Communist Party, published a similarly strongly worded statement, condemning Canada for arresting Meng and threatening to take action against Ottawa if Meng is not released.

“The Canadian side must realise clearly that there’s no vagueness between justice and arbitrariness,” the People’s Daily editorial reads.

“The Canadian side must correct its wrongs and immediately stop its infringement of the legitimate rights and interests of the Chinese citizen to give the Chinese people a right answer so that it can avoid paying a dear price.”

The joint condemnation by China’s foreign ministry, Xinhua and the People’s Daily against Ottawa is an unusual step, reflecting how seriously Beijing is taking the case and its determination to set Meng free.

While China did not specify what action it would take to inflict pains on Canada, the harsh wording suggests that it has plans to retaliate.

These could range from the freezing of diplomatic exchanges to the suspension of trade and would be likely to be set in motion if Meng is extradited to the US.

David Mulroney, a former Canadian ambassador to China, told Reuters on Friday that there will probably be “a deep freeze with the Chinese in high-level visits and exchanges”.

“The ability to talk about free trade will be put in the ice box for a while. But we’re going to have to live with that. That’s the price of dealing with a country like China,” Mulroney was quoted as saying.

Shi Yinhong, director of Renmin University’s Centre for American Studies and an adviser to the State Council, said that the Meng incident put China in a bind between the need to show it can protect its business people abroad without spooking other advanced industrial nations with a strong response against Canada.

“China is concerned that in the future more of its important people abroad will be seen as a threat, and that their safety will become an issue.”

“On the other hand, especially in the context of the comprehensive tension between Beijing and Washington, China has an interest to maintain and improve relations with other advanced industrial countries.

“If China takes a very strong revenge against Canada, it will hurt these relations. This is a dilemma, and it is difficult to predict what will happen.”

Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said Saturday there is “nothing to add beyond what the minister said yesterday”.

Freeland told reporters on Friday that the relationship with China was important and valued, and Canada’s ambassador in Beijing has assured the Chinese that consular access will be provided to Meng.

A court hearing over whether Meng should be bailed will continue on Monday.

Additional reporting by Reuters

https://www.scmp.com/news/china/diplomacy/article/2177091/beijing-blames-canada-huawei-arrest-and-threatens-grave

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China threatens ‘serious consequences’ for Canada for Huawei episode

December 9, 2018

Canada’s detention of Meng Wanzhou is “in disregard of the law, unreasonable, merciless and very evil”

Image result for china, canada flags, pictures

By Kathrin Hille in Taipei

China has threatened “serious consequences” for Canada for Ottawa’s arrest of Meng Wanzhou, chief financial officer of Chinese telecoms equipment maker Huawei, in a sign the technology stand-off between the US and China is spilling over into other countries’ relations with Beijing.

Canada arrested Ms Meng, the daughter of Huawei founder Ren Zhengfei on a US extradition request on 1 December on transit in Vancouver.

According to a prosecutor at a bail hearing on Friday, Washington accuses Ms Meng lying to US banks to circumvent US sanctions on Iran.  In a sharply worded statement, the Chinese foreign ministry said Le Yucheng, vice foreign minister, had summoned Canada’s ambassador to Beijing on Saturday to lodge a strong protest.

“China strongly urges Canada to release the detained person to effectively protect her legitimate rights,” the statement said. “Otherwise it will create serious consequences, and Canada will bear the full responsibility.”

Mr Le said Canada’s detention of Ms Meng was “in disregard of the law, unreasonable, merciless and very evil”.

Image result for Huawei, 5g, pictures

Huawei, one of China’s most successful technology companies, has failed to make inroads in the US market as Washington has long blocked its attempts at acquiring local companies and selling its gear to major local networks.

The US administration believes that the Chinese company poses a threat to national security because it is concerned Huawei could help the Chinese military, through compromised equipment, spy on America.

Recommended Analysis US-China trade dispute Huawei executive’s arrest threatens US-China trade talks

US security officials cite the fact that Mr Ren was an officer in the People’s Liberation Army before he founded the company as an indication of close links between the company and the Chinese armed forces. Huawei insists it is a private company owned by its employees.

Until recently, Huawei had found success in western markets, supplying the gear for 3G and 4G networks in the UK. But this year, Washington has launched a campaign to convince its allies of the alleged risks of Huawei gear, and subsequently governments in the ‘Five Eye’ group of countries that share intelligence with the US have moved to exclude Huawei from contracts for 5G, the next-generation mobile networks that are now being deployed.

Ms Meng’s arrest immediately raised fears that the truce in the US-China trade war which US president Donald Trump and Chinese president Xi Jinping announced a week ago would be derailed.  It has also sent a chill through companies engaged in bilateral economic exchanges as executives feared that they might be targeted should China retaliate.

Huawei, which says it is not aware of any wrongdoing on the part of Ms Meng, said that it would continue to follow the bail hearing on Monday. “We have every confidence that the Canadian and US legal systems will reach the right conclusion,” the company said in a statement on Saturday.

https://www.ft.com/content/7ba065a0-fb6b-11e8-aebf-99e208d3e521

Huawei dominates high-level Australia-China talks led by Howard

December 8, 2018

The Huawei controversy dominated a high-level meeting in Beijing between Australia and China, in the wake of the dramatic arrest of Huawei executive heiress Meng Wanzhou.

Former Australian prime minister John Howard meets Chinese State Councilor Yang Jiechi at Zhongnanhai in Beijing.

 

Former Australian prime minister John Howard meets Chinese State Councilor Yang Jiechi at Zhongnanhai in Beijing. CREDIT:SANGHEE LIU

Former prime minister John Howard led the Australian delegation at annual talks and later met with China’s most senior diplomat, Politburo member Yang Jiechi, at the Zhongnanhai leader’s compound.

Yang, a top advisor on the United States and a friend of the Bush family, noted Howard had been the Australian prime minister for 11 years and said China remembered his “important contributions to bilateral ties”.

“The continued growth of Australia China relations requires joint efforts from both sides,” he said.

Prime minister Scott Morrison – the fifth prime minister in five years – is yet to visit Beijing, but has said he wanted to emulate Howard’s approach of working with both China and the United States.

Despite the sub-zero temperatures outside Zhongnanhai’s ancient Hall of Purple Light pagoda, the mood inside the room showed a sustaining thaw in bilateral relations.

Howard told Yang in front of media cameras there had been “some good debating tussles” earlier in the day.

It is understood the topic of Huawei was raised repeatedly during the meeting between the Australian and Chinese delegations, but not in the meeting with Yang.

Australia was the first member of the Five Eyes security alliance to ban Huawei from participating in its 5G network on national security grounds, after warnings from the US.

Huawei's chief financial officer Meng Wanzhou.
Huawei’s chief financial officer Meng Wanzhou.CREDIT:AP

Meng’s arrest a week ago in Canada under an extradition request by the United States for alleged Iran sanctions violations is being viewed by Chinese media as part of an effort to contain Huawei’s global growth.

But as the trade war between China and the US worsens, Beijing has shown a willingness to repair its relationship with Australia.

Foreign minister Marise Payne and trade minister Simon Birmingham last month broke a year-long diplomatic freeze imposed by Beijing on ministerial visits to China after falling out with the Turnbull government over foreign interference legislation.

“We were able to renew the strength of the relationship today,” said Howard, who noted he had visited Beijing frequently when he was prime minister.

Howard, whose former electorate of Bennelong has a large Chinese Australian population, pointed to 1.2 million Australians of Chinese heritage, and “Chinese influence in all of our cities”, as important to the relationship.

Exports to China had helped Australia escape the Global Financial Crisis relatively unscathed, he said, and the economic relationship had since broadened from minerals to services and education.

“The relationship is in good shape but like all close relationships you’ve got to keep your friendships in good repair,” he said.

The High Level Dialogue, held each year between retired officials, business, academic and cultural figures from each country, is a more candid forum to air grievances and sticking points in the relationship than meetings of government officials – of which there have been few this year.

The delegation to Beijing included former Labor foreign minister Stephen Smith, former competition tsar Alan Fels, Jason Yat-sen Li, Australia China Council chairman and ANZ executive Warwick Smith, National Museum of Australia director Matthew Trinca, the Lowy Institute’s Richard McGregor and Business Council chief executive Jennifer Westacott.

Yang greeted Smith saying: “We have met before and we cooperated a lot.”

Smith was the foreign minister in the Rudd Government and dealt with China during the crisis sparked by the arrest of Rio Tinto executive Stern Hu during an iron ore pricing war between Australia and China.

Some analysts have pointed to parallels between Hu’s jailing and the arrest of Meng.

https://www.smh.com.au/world/asia/huawei-dominates-high-level-australia-china-talks-led-by-howard-20181208-p50l00.html

 

Huawei Arrests Shows U.S., Canada Mean Business — Trump’s Confronting China Wins Over Skeptical CEOs

December 8, 2018

Some American executives now see administration’s blunt approach as best shot to resolve intellectual-property grievances

Donald Trump and Xi Jinping at a dinner meeting on Dec. 1 Photographer: Pablo Martinez Monsivais/AP

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When President Trump first threatened to levy major tariffs on China, business leaders worried the administration was using the wrong weapon on the right target.

It wasn’t the flood of washing machines coming in and the trickle of Fords going out that raised the ire of America’s CEOs. They wanted something done about counterfeiting, allegations that the Chinese were stealing U.S. intellectual property and investment rules Beijing leans upon that force technology transfers.

Getting China to play by the rules has proven tough over past decades. International bodies—such as the Word Trade Organization—have insufficient power. Export controls and indictments are tools to address theft, but they work only in specific situations and can require cooperation from U.S. companies that may be reluctant to rock the boat.

It’s becoming clear Mr. Trump’s prolonged tit-for-tat trade fight may represent American business’s best shot at addressing those long-standing grievances.

“Calling the abuser an abuser to their face is the first step,” Basheer Junjua, chief executive of San Francisco software development firm Calculi, told me this past week at The Wall Street Journal’s CEO Council in Washington.

U.S.-China tensions have rattled markets. The Dow industrials started the past week strong after positive news on the trade front but plunged as doubts about a favorable outcome re-emerged. The arrest of a senior executive of networking-gear maker Huawei Technologies Co. on Wednesday intensified negotiations on trade.

The dozens of CEOs gathered for the Journal’s meeting in the capital, however, suggest business leaders have shifted their view of Mr. Trump’s confrontational approach. They now say they are encouraged that the administration recognizes complex problems demand sophisticated solutions.

National Security Adviser John Bolton outlined how negotiations could take a turn over a 90-day cease-fire China and the U.S. agreed to this past week. Speaking to the CEO Council, he proposed a rule that says there will be no imports into the U.S. of products or services based on the theft of American innovation.

“That’s not a tariff question,” he said. “That’s a way of defending intellectual property from the United States.”

Mr. Bolton insisted the administration can’t ensure fair trade without getting China to agree to a broad set of reforms.

“Let’s take a show of hands,” Mr. Bolton said to the assembled CEOs. “How many of you believe in free trade?” Several hands went up. “How many of you believe that free trade means allowing the Chinese to kick us around, steal your intellectual property and not respond to it?”

No hands went up.

When critics accuse the administration of not pursuing a free-trade policy by goading the Chinese, he concluded, “I say if there’s going to be free trade, they’re going to have to live by it.”

, the president of the U.S. Chamber of Commerce’s China Center, said the White House has a supportive audience in the business community when it comes to confronting China. When Mr. Trump came to office, there was “a frustration that had been building over a number of years.”

Many companies across many sectors have rushed to China, seeking a new market for goods and a lower cost for manufacturing. As they did, it became increasingly clear what price they had to pay to enter the most populous nation in the world.

“The allure of a billion-plus-people market is an allure for every company,” Mr. Janjua, the Calculi CEO, said. “However, they made the rules say ‘if you want to come work with us you have to put all the technology on the table.’ ”

The trade-off is costly. Earlier this year, the White House published research estimating an annual cost of between $250 billion and $600 billion to the U.S. economy from China’s counterfeit goods, pirated software and theft of trade secrets. By comparison, the National Science Foundation estimates the U.S. spends an average of $445 billion in annual research and development.

Several experts say past administrations attempted to address alleged abuses but lacked resolve. For instance, many companies and regulators figured China would eventually act like the rest of the countries in the WTO.

“People were making a bet which direction China would take, and it looked like China would follow global rules,” said James Andrew Lewis, a vice president at the Center for Strategic and International Studies, a bipartisan research organization in Washington. When it comes to trade, Mr. Lewis says China’s strategy to win at any cost often overshadows the desire to be seen as a good citizen of the world.

“Calling the abuser an abuser to their face is the first step.”

—Basheer Junjua, chief executive of software development firm Calculi, on the need to confront China on intellectual-property grievances

Abigail Grace, a researcher at the Center for New American Security, a bipartisan think tank in Washington, said the Obama administration was initially reluctant to call China out on specific allegations of theft or counterfeiting. That’s because it was trying to get Beijing to cooperate on various multilateral agreements.

“If one pushed China too hard on individual issues, it would jeopardize those broader goals,” Ms. Grace said.

President Obama took a harder line with China during his second term when it became clear Chinese President Xi Jinping wasn’t going to open the Chinese market up as much as initially hoped, she said. Getting the support of American business was tough, Ms. Grace said, because “companies were hesitant to admit this type of rampant IP theft was taking place because of how shareholders might respond.”

Mr. Lewis, a former foreign service officer in the State and Commerce departments, said reforms could be messy, particularly because of the interconnectedness of supply chains or joint ventures.

For example, his organization is preparing to publish a report on whether the next generation of cellular networks, known as 5G, is viable without China’s help.

He said companies like China’s Huawei or ZTE Corp. “can’t make products without U.S. technology.”

Can Western firms could pull off 5G without Chinese partners? “The answer is yes, but it is going to cost a lot more.”

Write to John D. Stoll at john.stoll@wsj.com

Appeared in the December 8, 2018, print edition as ‘Trump’s China Tack Wins Fans.’

https://www.wsj.com/articles/trumps-tough-china-tack-wins-over-skeptical-ceos-1544245201

Germany Resists Pressure to Abandon Huawei

December 7, 2018

German officials were reportedly pushing earlier this year for their government to follow other countries’ lead and slap a ban on Chinese IT firm Huawei. But Berlin doesn’t seem inclined to bow to US pressure.

    
Logo von Huawei (Reuters/H. Hanschke)

Chinese multinational tech giant Huawei Technologies opened a new information security lab in the German city of Bonn last month. Some observers see the move as designed to butter up German regulators ahead of the country’s 5G mobile spectrum auction.

The German network regulator (BNetzA) is finalizing the terms for the 5G licensing round it plans to hold in the first quarter of 2019.

The total cost of building Germany’s 5G networks could be €80 billion ($91 billion) and this means high stakes for Huawei and its rivals Ericsson, Nokia, ZTE and Samsung.

Not too bothered

Germany doesn’t have its own indigenous telecoms hardware industry to speak of and maintains close trade and investment ties with Beijing.

The German interior ministry has said there is no legal basis to exclude foreign equipment providers from the country’s 5G system and no such measure is planned.

Read more: China’s Huawei finance chief arrested in Canada, faces extradition to US

There is no formal bilateral agreement on preventing commercial cyber espionage between Germany and China, but the number of known China-originated commercial cyber espionage attacks on German companies has dropped in the past two years, according to the Australian Strategic Policy Institute (ASPI).

This is corroborated by the Federal Office for the Protection of the Constitution (BfV), Germany’s domestic intelligence agency. The fall has been linked to an increase in Chinese foreign direct investment in high-tech and advanced manufacturing industries in 2016.

Former BfV head Hans-Georg Maassen has linked the decline to an increase in the use of legal tools for obtaining the same information, such as corporate takeovers.

“Industrial espionage is no longer necessary if one can simply take advantage of liberal economic regulations to buy companies and then disembowel them or cannibalize them to gain access to their know-how,” Maassen said.

But things may be changing. “The German public discourse around China has changed in the last year or so, not primarily rushed by the US,” cyber security specialist Raffaello Pantucci told DW. “The Germans have seen several cases where the Chinese have crossed a line.”

Read more: Exit the Dragon? Chinese investment in Germany

Pantucci believes the Chinese will now have difficulty winning the 2019 5G auction. “This puts the cat among the pigeons. No country can avoid this dilemma and I think it’s now very unlikely a Chinese firm will win.”

Huawei Australien (Imago/ZumaPress//Imago/M. Schwarz)Australia has cited national security risks with regard to Huawei

Issues in the UK, Australia and New Zealand

Britain’s BT Group said this week it will remove Huawei Technologies’ equipment from its core 4G network within two years and has also excluded Huawei from bidding for contracts to supply equipment for use in its core 5G network.

However, a ban remains unlikely in the UK, due to the advanced stage of Huawei’s involvement in 5G development in the country.

New Zealand has also rejected Huawei’s first 5G bid, citing national security risks while earlier this year, Australia banned Huawei from supplying 5G equipment for the same reason.

US pressure

The US is putting increased pressure on its political allies, including Germany, to exclude Huawei from their next-generation mobile networks. Washington has long said Huawei and ZTE, another Chinese hardware maker, are potential menaces to security and privacy.

US authorities have pointed to China’s national intelligence law, which they say could force Chinese companies to facilitate spying efforts in other countries. US authorities cited the issue when they blocked Broadcom’s hostile takeover of Qualcomm earlier this year.

In 2013, the US Commission on the Theft of American Intellectual Property estimated that the theft of Intellectual Property was $300 billion (€257 billion) annually, with 50 to 80 percent of the thefts attributed to China.

But why is it all such a big deal?

“Many states are concerned about using Chinese telecommunications and technology companies in critical infrastructure companies for a range of reasons,” Daniella Cave, a specialist on cyber security at ASPI, told DW.

Firstly, she says, the Chinese state has a history of aggressive and wide-ranging espionage and intellectual property theft.

Secondly, the national intelligence law they introduced in 2017 compels organizations and individuals to participate in intelligence activities and to keep secret the intelligence activities they are aware of.

Thirdly, there have been allegations that Chinese companies have been complicit, knowingly or unknowingly, in the theft of secrets and valuable government data, Cave says.

A double-edged sword

“I think the Chinese state’s introduction of the national intelligence law is going to place suspicion on the international activities of most of China’s large companies going forward,” Cave says.

“But it’s a double-edged sword for China, as the Chinese Communist Party has made it virtually impossible for Chinese companies to expand without attracting understandable and legitimate suspicion,” she adds.

Cave believes most developed states will be looking at ways in which they can move away from the use of Chinese products in their critical infrastructure.

“A lot of companies have already, and will continue, to look at ways in which they can minimize the risks to their supply chain by closely scrutinizing the hardware and software in their systems.”

https://www.dw.com/en/pressure-on-germany-as-uk-telecoms-company-shuns-huawei/a-46609010

The Education of Huawei

December 7, 2018

The telecom giant pays a price for China’s abuse of global trade norms

Editorial
The Wall Street Journal

Image result for Ren Zhengfei, Xi Jinping, pictures

Photo: Xi Jinping and Huawei founder Ren Zhengfei

Another day, another China drama in world markets. Thursday’s jolt was news that Huawei CFO Meng Wanzhou was arrested in Vancouver at the request of U.S. officials for allegedly violating Iran sanctions. The press corps is focusing on the arrest’s timing amid new trade talks. But the arrest is best understood as an attempt to get Beijing to stop abusing global trade norms.

Huawei is the world’s largest telecom equipment manufacturer and second biggest supplier of handsets. Ms. Meng is the daughter of Huawei founder Ren Zhengfei and has helped to steer its colossal growth. Her arrest occurs amid heightened worries about the Chinese telecom giant’s cyber threat.

The concerns go back at least to 2012 when the House Intelligence Committee warned that Huawei and its smaller competitor ZTE were violating U.S. laws and could be used for spying and theft. Huawei “likely remains dependent on the Chinese government for support” and the Chinese Communist Party maintains a “Party Committee within the company,” said the committee report that also implied Huawei wasn’t complying with Iran sanctions.

The Trump Administration and its intelligence counterparts in the Five Eyes—Australia, Canada, New Zealand and the U.K.—have been briefing allies about Huawei’s cyber risks and encouraging foreign carriers to use other suppliers in their 5G networks, which will enable interconnected home devices, smart grids and self-driving cars.

5G could also make it easier for the Chinese to conduct corporate espionage, disrupt commerce and steal secrets. Damage from security breaches may be harder to identify and contain. In a speech this week, Canadian Security Intelligence Service director David Vigneault cited a “trend of state-sponsored espionage” through 5G networks.

These warnings have spooked U.S. carriers into spurning Huawei equipment. Australia blocked Huawei and ZTE from its 5G networks in August, and New Zealand followed last month. Britain’s largest wireless carrier, BT Group , this week pulled Huawei from its network core, which is used to transfer calls and internet traffic. The head of Britain’s MI6 intelligence service, Alex Younger, says cell towers may be vulnerable.

San Jose-based CNEX Labs in October alleged that Huawei sought to lift its semiconductor technology. The Justice Department in October charged a Chinese Ministry of State Security director with conspiring to steal GE Aviation trade secrets and Fujian Jinhua Integrated Circuit Co. with pilfering IP from America’s Micron Technology .

These sanctions are a better way to punish Chinese abuses than blunderbuss tariffs, which also hurt Americans. Yet President Trump this year let ZTE off easy after it was caught repeatedly violating U.S. sanctions. An export ban that Commerce had proposed could have put ZTE out of business. China repaid Mr. Trump by blocking Qualcomm ’s acquisition of NXP Semiconductors , which posed a competitive threat to Huawei.

News reports say U.S. intelligence suspected in 2016 that Huawei was skirting sanctions, and one question is why the U.S. didn’t act sooner to send Beijing a message. The charges against Ms. Meng haven’t been published, and she and Huawei deny wrongdoing. But the South China Morning Post reported that during an internal talk on compliance in October, Ms. Meng told employees that in cases “the company is totally unable to comply with in actual operations . . . after a reasonable decision-making process, one may accept the risk of temporary non-compliance.” That risk now includes arrest.

Beijing might counter by arresting U.S. CEOs in China, and trade talks could break down. But enforcing laws and negotiating a trade deal aren’t incompatible. The U.S. has to enforce its laws or they’re meaningless, and China has to see there is a price for violating norms in pursuit of economic and security dominance. Play by the rules, and everyone can prosper.

Appeared in the December 7, 2018, print edition.

https://www.wsj.com/articles/the-education-of-huawei-1544142113