Hostilities have flared up between Chinese technology giant Huawei and Western governments this week. At the heart of the dispute are fears over cyber security and national security, together with allegations of fraud and conspiracy.
On 28 January – Data Privacy Day – China’s envoy to the EU, Zhang Ming, attacked what he called the “slander” and “discrimination” that he believes are being faced by Chinese companies, as tensions rise between the US and China over trade.
Zhang suggested that security concerns about Chinese technology products, which have led European companies such as BT and Vodafone, among others, to either strip out Huawei equipment or pause 5G partnerships, have been fabricated for political ends.
The story broke as it was reported that another Chinese company, chipmaker Fujian Jinhua, will have to halt production in March, as a result of US sanctions.
On the same day, the US Justice Department filed a total of 23 different charges against Huawei, including bank fraud, wire fraud, conspiracy to commit money laundering, and alleged technology theft from T-Mobile, against a background of concerns that Beijing could be using Huawei technology to spy on Western interests.
The charges were filed on both the East and West coasts of the US.
Last week, charity the Prince’s Trust joined a growing list of UK organisations to suspend ties with Huawei. However, the BBC reports that the Universities of Cambridge and Surrey are among those saying that there is no compelling reason to end relations with the company. In short, there has been no proof of wrongdoing.
Targeting the CFO
In December, Huawei’s Chief Financial Officer, Weng Wanzhou, was arrested on charges that the company misled the US over its relationship with two subsidiaries, Huawei USA and Skycom, allowing it to conduct business covertly with Iran.
Huawei denies the allegations, which are among those that will now be tested in court.
Mrs Weng is the daughter of Huawei’s founder and President, Ren Zhengfei, a former engineer in the People’s Liberation Army.
Who’s spying on who?
Huawei is now the world’s largest producer of telecoms equipment and the second largest smartphone manufacturer after Samsung. It has also been ramping up its presence in artificial intelligence (AI), chipsets, cloud services, and – ironically – surveillance and security monitoring products.
Cities in Venezuela, Saudi Arabia, Pakistan, Singapore, Thailand, Serbia, and Ghana are among the biggest customers for the latter. At its Huawei Connect event in Shanghai last October (attended by this journalist), Huawei equated the concept of smart cities with policing and citizen surveillance – an attractive concept for some regimes.
Last July, the UK’s Huawei Cyber Security Evaluation Centre (HCSEC) warned the British government that it could only offer limited assurance that installing Huawei products in the telecoms infrastructure posed no national security risks.
One of the chief concerns about the products is that they are core to many 5G rollouts. The US, Australia, and New Zealand have all barred Huawei from supplying components to their 5G infrastructures.
HCSEC monitors all of Huawei’s activities in the UK. It is made up of security representatives from communications monitoring hub GCHQ, the Cabinet Office, and the Home Office, among others. So the British government is certainly spying on Huawei.
The Cell, based in Banbury, Oxfordshire, monitors Huawei’s technology for backdoors and exploitable flaws. While the unit operates under the joint supervision of GCHQ and the government, it is owned by Huawei. To date, there has been no suggestion from the UK’s security agencies that it has acted improperly.
In April last year, the US announced that it would ban American companies from buying technology from any supplier deemed to be a national security risk, including Huawei.
A month earlier, President Trump used national security as the pretext to block Broadcom’s planned purchase of chip rival Qualcomm, heralding the start of the current trade war.
However, he has also cited it in the context of European carmakers moving legitimately into the US market. For the President, therefore, national security appears to be tied up in a belief in economic isolationism.
His China policy – which, publicly at least, centres on IP protection and bilateral market access – can also be seen in the context of China’s growing power as the world’s second largest economy.
But until allegations about Huawei’s activities are proven, the West has a problem. It has long relied on low-cost Chinese manufacturing, outsourcing, and components, both for its own technology giants – an A-Z of US companies manufactures hardware in China and Taiwan – and for service rollouts.
This keeps costs down and profits up across the board. But it has also helped fuel China’s staggering economic growth: in the 1980s, the US economy was 15 times larger than China’s; today it is just 1.5 times larger. China is automating faster than any nation on Earth, and over the past 30 years, 500 million people there have moved out of rural poverty and into its fast-expanding cities.
Western security services believe that Chinese state dominance means that its companies would have to oblige if ordered to co-operate with Beijing, which holds direct investments in many of them. It seems unlikely that any CEO would refuse.
At the same time, China is building a national surveillance and social ratings system, using technologies such as AI, facial recognition, machine learning, and big data analytics to monitor citizens, reward good behaviour – and punish bad.
That said, the United States is hardly neutral in this regard. Numerous American companies work closely with the US government, including with its security agencies, and allegations of backdoors have dogged some of them for years.
Indeed, some Western nations have been open in their calls for technology companies to allow product access to security services. Last year the so-called ‘Five Eyes’ intelligence-sharing group of nations (the US, UK, Canada, Australia, and New Zealand) issued a memo demanding that companies allow security agencies access to citizens’ encrypted call and message data.
“Should governments continue to encounter impediments to lawful access to information necessary to aid the protection of the citizens of our countries, we may pursue technological, enforcement, legislative or other measures to achieve lawful access solutions,” read the memo. A fist in a velvet glove.
At the core of the row is a simple problem, therefore: the West can’t be sure what Beijing is doing, even as it opens up its economy to increased Western investment. Meanwhile, the ‘made in China’ labels on countless products take on new meaning as economic and political power haemorrhages towards the East.
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