Chinese Premier Li Keqiang said during a meeting with the Greek Prime Minister that Beijing is closely monitoring EU investigations into China’s solar-panel and wireless-network products, according to state television. Mr. Li also called for Greece to try to persuade the EU to use caution in applying any trade measures.

At a news conference also on Thursday, Shen Danyang, a spokesman for China’s Ministry of Commerce, said China would take necessary measures to defend its mobile-telecommunications equipment companies against any sanctions taken by the EU.

Mr. Shen also said new tariffs on Chinese solar manufacturers, which are set to be announced next month, were akin to “picking up a stone to drop on one’s foot.”

[Source]

The EU claims that Huawei and ZTE receive subsidies from the Chinese government that enable the companies to sell products below cost and gain market share on global competitors, practices that both companies have denied. From The China Daily:

Huawei, the world’s second-largest telecom equipment maker by revenue, said in a statement: “Huawei is disappointed that the European Commission has taken the unprecedented step of deciding in principle to open the first ever ex-officio dumping and subsidy investigations.”

The company said it always plays fair and wins business and trust through innovative technology and quality service, rather than via pricing or subsidies.

Dai Shu, a spokesman for ZTE, said his company has yet to receive any official letter from the EU and insisted it receives no illegal subsidies to do business in the region.

[Source]

The Commerce Ministry spokesman added that China had made a recent proposal about the telecoms situation to an EU delegation but had not received a response, according to Reuters:

“This makes one cast doubt on the sincerity of the EU to resolve conflicts through consultations,” Shen said.

EU officials said on Wednesday they have had an open-door policy to the Chinese authorities for more than a year at China’s own request, but that the response had been disappointing so far.

“As we made clear yesterday, the European Commission counts on our Chinese partners to take up the offer of negotiations in a serious manner to find an amicable solution to resolve this situation,” EU trade spokesman John Clancy told Reuters on Thursday.

[Source]

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Until this week, Mr. Ren, 68 years old, had made few public appearances. The last time he was seen speaking at a public event was at a conference last June in St. Petersburg.

Mr. Ren’s first media briefing comes at a time when his company is trying to increase transparency after facing challenges in the U.S., where security concerns raised by lawmakers over the Chinese firm’s network equipment have prevented it from doing any meaningful business. The event also followed Huawei’s recent efforts to make more executives available to the media. When the company released its 2012 annual report last month, two of its most senior executives hosted a roundtable with reporters. Still, improved accessibility of executives made Mr. Ren’s absence even more obvious.

“Mr. Ren was starting to feel more comfortable about speaking with the media,” said Huawei spokesman Scott Sykes. “This is a major step for us.”

[Source]

Huawei only recently began to offer the public access to its decision makers. No international media or photographers were allowed at the briefing, according to BBC News, which reported that Ren addressed concerns held by the U.S. and other countries over Huawei’s relationship with the Chinese government and military:

“Huawei has no connection to the cyber-security issues the US has encountered in the past, current and future,” he told the reporters.

“Huawei equipment is almost non-existent in networks currently running in the US. We have never sold any key equipment to major US carriers, nor have we sold any equipment to any US government agency,” Mr Ren said.

…

There have been concerns and allegations that Huawei was helping China gather information on foreign states and companies, charges that the firm has denied.

According to a Fairfax Media, one of the outlets to interview Mr Ren, he told reporters that he was confident that no staff member of Huawei would engage in spying even if asked to do so by Chinese agencies.

[Source]

Ren chose New Zealand as the location for the briefing because Huawei has enjoyed friendly treatment in the country, according to Forbes’ Robert Olsen. Bloomberg Businessweek’s  Bruce Einhorn notes that Ren stepped into the spotlight far away from his company’s biggest markets:

Ren didn’t reveal much. What is his relationship to the People’s Liberation Army? What role, if any, does the Chinese military have in the ownership or operation of Huawei? Suspicions about that connection drive a lot of the anti-Huawei activity of lawmakers and officials in the U.S. and elsewhere, so Ren could have helped clear the air by talking about the army.

Instead, he described how he became a Communist. He joined the party in 1978, shortly after the Cultural Revolution, and presented himself as an idealist who still believed the era’s serve-the-people rhetoric. “At that time my personal belief was to work hard, dedicate myself or even sacrifice myself for the benefit of ‘the people,’” he said. “Joining the Communist Party was in line with that aspiration.” As for human-rights issues in today’s China, Ren said, “For people like myself who went through the Cultural Revolution and all those complicated times, I think China has gone through tremendous progress.”

[Source]

Read more about Huawei via CDT.

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Regardless of the future government policy, Chinese citizens and their employers continue to seek out westward connections on their own. Song Jian, a 25-year-old from Henan province in central China, is one of thousands of Chinese engineers who work in the Gulf countries. He helps companies gain access to facilities built by the major Chinese telecom equipment maker Huawei, and his clients, he said, include not only local companies but also American businesses and even a U.S. military base.

In 2011, Huawei’s sales across the Middle East rose 20 percent to $3.22 billion, beating the $2.27 billion generated by Ericsson, the world’s largest maker of telecommunications services by revenue. The Middle East, according to Huawei’s website, is one of the company’s fastest growing markets.

Thanks to the expansion of Chinese companies like Huawei, Song said his firm ranks among the most profitable telecom service companies in Saudi Arabia. His quality of life seems to confirm that; he makes $2,000 a month, a much higher salary than his friends at home, and enjoys the use of a company-rented villa in Dammam where he and a colleague fish on the weekends.

[...]Chinese workers, like the companies they serve, found the opportunities they sought in moving west. But it is still uncertain if they have inspired their government to follow.

For more on Chinese influence in the Middle East, see “Can China Win in Afghanistan,” or “China Faces Shifting Dynamic in the Middle East,” via CDT.

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“We hope that the more people know about Huawei, the more it will help us,” Mr. Ding said through an interpreter in Huawei’s crowded exhibition stand. “It is certainly a positive influence and help with our global business when we are open towards the government, media, customers and the general public.”

For Mr. Ding, a spry, 43-year-old, for Huawei and perhaps for China, now is the time to tell the company’s story, instead of letting others do it for them.

That is a priority for Huawei, which has been virtually shut out of the U.S. market, the world’s biggest for telecommunications equipment, because lawmakers are concerned about its links to the Chinese government and military. A recent spate of hacking incidents tied to the military has not helped its cause.

Huawei denies that it is subsidized by the Chinese government and that its equipment poses a threat. The company says the U.S. blockade, encouraged last year by a congressional committee, is trade protectionism.

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Security and technology experts consulted by the FT reviewed the project plan and all noted its civilian and potential military applications. Robert York, a professor of electrical and computer engineering at the University of California, Santa Barbara – a world leader in GaN research and where Shane earned a doctorate in silicon devices – said it would be “unnerving but not surprising” if Huawei were to be trying to advance its GaN technology. The high-powered amplifier has civilian use but “could be used for a number of military applications: high-powered radar, electronic warfare including signal jamming and even potentially some weapons”, Professor York added.

Shane, it turns out, had deep misgivings about the project he was working on and feared he was compromising US national security. His family wants to know whether that project sent him to his grave.

Huawei denied on Monday that it had worked with IME on the project in question, according to Reuters:

“IME approached Huawei on one occasion to cooperate with them in the GaN field, but we decided not to accept, and consequently do not have any cooperation with IME related to GaN,” Huawei said in a statement.

…

At the heart of the family’s theory is that Todd was concerned for his safety because of a project with a Chinese company. They believed, through information from his colleagues and from his computer files, that the company was Huawei.

Reuters can’t independently corroborate their views about the role of Huawei or the circumstances of Todd’s death.

…

Huawei declined to say whether they had been working on other projects with IME. Colleagues said shortly after Todd’s death that he had told them at one point he had been working on a project with Huawei but that it was not sensitive or high-level in nature.

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Fredrik Bergman ran into a problem when a client in Sweden tried to transfer files to his firm’s headquarters here: Each time, the firm lost its Web connection for an hour or so.

After several weeks of multiple outages a day, he says, the firm solved the puzzle: the files were named for the Swedish town of Falun, where the client was working. Mr. Bergman says his firm thinks the name triggered the filters China’s online censors use to block discussion of Falun Gong, a religious group long banned in China.

[…] The American Chamber of Commerce in China said last year that nearly three-quarters of about 300 businesses it surveyed said unstable Internet access impedes their efficiency. About 40% said China’s censorship efforts have a negative business impact.

[…] “The real question is whether the next administration is going to continue to roll back Internet availability to foreign firms,” [Shaun] Rein said. He said companies are unlikely to pull out of China in any case, but they likely will think twice about moves like shifting their regional headquarters to Beijing from places like Singapore and Hong Kong. “They will still invest in China,” he said. “It just depends on what scale.”

Though one China-based entrepreneur tells Mozur and Tejada that homegrown web companies have benefited from shelter against international competition, the overall cost of Internet controls on Chinese firms is likely to be even higher. From Andy Yee at openDemocracy:

This censorship regime is hurting China’s competitiveness in the internet age. Very often, it is commercial firms that bear the collateral damages. Online portals are frustrated about the energy and time wasted on outsourced censorship tasks from the propaganda department. Chinese web giant Tencent has to work hard to deal with censorship concerns connected with its globally popular chat app WeChat among international users, who are accustomed to sharing information freely. Chinese telecom giants Huawei and ZTE, flagged by the US Congress as security threats on flimsy evidence, are victims of China’s perceived opacity. And investor uncertainty about censorship and over-regulation mean that market performance of Chinese internet companies will never achieve their potential.

More importantly, to the extent that web technologies become essential platforms for learning, collaboration and innovation, China runs serious risks of underachieving its information technology ambitions. Chinese talents are robbed of learning possibilities simply because many foreign websites and tools are blocked. According to a UNESCO report, some open educational resources are out of reach for students and educators in China because they are filtered by the Great Firewall.

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The discovery raises questions about procurement practices by U.S. departments responsible for national security. The U.S. government and Congress have raised concerns about Huawei and its alleged ties to the Chinese military and government. The company, the world’s second-largest telecommunications equipment maker, denies its products pose any security risk or that the Chinese military influences its business.

[…] William Plummer, Huawei’s vice president of external affairs in Washington, said in an email to Reuters: “There has never been a shred of substantive proof that Huawei gear is any less secure than that of our competitors, all of which rely on common global standards, supply chains, coding and manufacturing.

“Blackballing legitimate multinationals based on country of origin is reckless, both in terms of fostering a dangerously false sense of cyber-security and in threatening the free and fair global trading system that the U.S. has championed for the last 60-plus years.”

The Economist (via CDT) addressed the Huawei investigation in a pair of articles last August.

In another sign of American wariness, China was specifically excluded last week from the relaxation of export restrictions on communications satellites. From William J. Broad at The New York Times:

The strict export controls arose from a political fight over satellite launchings by China, which in the 1980s began offering cheap rides into orbit on low-cost rockets. Presidents Ronald Reagan and George H. W. Bush, both Republicans, approved transfers of American spacecraft to Chinese rockets, as did President Bill Clinton, a Democrat.

Starting in early 1998, a series of upsets brought the expanding trade to a halt. Two American satellite makers involved in the Chinese launchings, Hughes and Loral, were accused of giving China advice about making not only commercial rockets, but also military missiles.

Republicans, who controlled Congress at the time, argued that satellite exports could lead to a hemorrhage of secret materials and information, and said that China might already have stolen encryption secrets.

China responded to its continued exclusion with “grave concern”. From Yang Jingjie at Global Times:

[… T]he relaxation of export controls shut China out by stipulating that no satellites or related items may be exported, re-exported or transferred to China, North Korea or any country that is a state sponsor of terrorism. It prohibits satellites or related items from being launched in those countries, and prohibits those countries from using these items in their launch vehicles. Only the president could waive the prohibition on a case-by-case basis.

In response, China expressed grave concern.

[…] “The Obama administration has made repeated promises to relax high-tech export controls. But it turns out that it has been the strictest,” Zhou Shijian, a senior researcher with the Center for US-China Relations at Tsinghua University, told the Global Times.

The new rules proposed by some right-wing legislators have in fact labeled China as “an enemy” of the US, Zhou said, noting that even during the Cold War era, the US didn’t stop space cooperation with the former Soviet Union.

China’s satellite programmes, including its Beidou navigation system, do have significant military applications. But congress’ determination to block any cooperation with China in space also has critics in the U.S.: NASA astronaut Leroy Chiao urged a new Sino-American space partnership in 2011; Harvard-Smithsonian astrophysicist Jonathan McDowell and Joan Johnson-Freese of the Naval War College discussed the loss of “major opportunities” on NPR’s Talk of the Nation last June; and the Council on Foreign Relations’ Frank Klotz suggested in July that cooperation based on the U.S.-Russian model might better “serve long-term American interests”.

Currently, the absence of any established framework for cooperation is complicating Washington’s response to an anticipated Chinese anti-satellite weapon test, rumoured to be scheduled for January 11th. From Gregory Kulacki at the Union of Concerned Scientists:

High-level intervention in both countries is needed to stop the test and start discussions. Remarkably, there are no regular channels of communication on space issues between China and the United States. Congressional opposition to scientific and commercial cooperation with China in space shut down potential talks on human space flight that could have led to a bilateral dialog on space security.

[…] China’s space program is still in the formative stages of its development. Both the United States and the former Soviet Union conducted equally high profile ASAT testing during comparable stages in the development of their space programs, and both eventually decided to stop destructive ASAT testing. Hopefully, China will eventually come to a similar conclusion. Beginning a meaningful bilateral dialog on space security between the United States and China could hasten the day.

A Global Times editorial defended the development of anti-satellite weaponry as necessary “to deter the US from taking risky action against China in this period of great transition”, given its rejection of past olive branches.

China’s public policy is peaceful use of space, which is also China’s real desire. China has no interest in launching a large-scale space race with the US. China and Russia jointly initiated a program to avoid an arm race in outer space in 2008, but this proposal was refused by the US.

Against this background, it is necessary for China to have the ability to strike US satellites. This deterrent can provide strategic protection to Chinese satellites and the whole country’s national security.

[…] In the foreseeable future, gap between China and the US cannot be eliminated by China’s development of space weapons. The US advantage is overwhelming. Before strategic uncertainties between China and the US can disappear, China urgently needs to have an outer space trump card.

[…] Therefore, hopefully, the speculation about China’s anti-satellite tests is true.

American arms sales to China’s neighbours, meanwhile, are “set to boom”, according Reuters’ Jim Wolf, reporting on a forecast by the Aerospace Industries Association.

Fears resulting from China’s growing military spending should lead to enough U.S. sales in South and East Asia to more than offset a slowdown in European arms-buying, according to the forecast.

[…] Overall, the United States reached arms transfer agreements in 2011 totaling $66.3 billion, or nearly 78 percent of all such worldwide pacts, according to the nonpartisan Congressional Research Service. The 2011 total was swollen by a record $33.4 billion deal with Saudi Arabia. India ranked second with $6.9 billion in such agreements.

Rupert Hammond-Chambers, who consults for U.S. arms makers through BowerGroupAsia, an advisory with 10 offices in the region, predicted Southeast Asian defense budgets would expand steadily as a hedge against Chinese assertiveness in disputes in the South China and East China seas.

[…] The Obama administration says arms sales are an increasingly critical and cost-efficient arrow in its quiver to defend U.S. worldwide interests.

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Congee and dumplings are on the breakfast menu at enterprising hotels, major London stores have installed Chinese bank card terminals, and Mandarin-speaking staff are on hand to help out with the Christmas shopping.

Britain is courting Chinese travellers not only because they are a rapidly growing market — they made an estimated 70 million overseas trips in 2011, up 20 percent in just a year — but because they are serious shoppers.

The renowned Harrods department store, in London’s exclusive Knightsbridge district, now has 70 Mandarin-speaking staff and more than 100 China Union Pay terminals allowing direct payment from Chinese bank accounts.

But Britain’s share of the coveted Chinese market is poor compared to several competitors in mainland Europe including France, which welcomed nearly a million tourists from China last year.

Despite this attempt to lure Chinese tourists to the United Kingdom, economic tensions due to Chinese telecom giant, Huawei, between China and the UK may spark a trade war, from The Independent:

Britain could face a damaging multibillion-pound trade war with China and see the roll-out of economically vital 4G mobile internet services derailed if an intelligence report, due to land on David Cameron’s desk within the next two weeks, finds that the UK operations of the Chinese communications giant Huawei represents a threat to the UK’s cyber-security.

Downing Street, according to intelligence sources, is prepared to face a costly trade backlash by Beijing if it opts to blacklist the multinational over allegations that the company has links to the Chinese army and concerns that its equipment could be used for cyber-espionage by the Chinese government. Huawei, though not a high-profile consumer brand in the UK, controls a quarter of the EU’s telecom-equipment market, winning over half of all the contracts for 4G infrastructure technology awarded throughout Europe. The Chinese multinational is also supplying the 4G technology for EE, the company that controls Orange and T-Mobile, and has signed similar deals with O2 and 3UK.

Concerns over the potential for state cyber-espionage involving Huawei has recently seen the US House of Representatives’ intelligence committee recommend that the Shenzhen-based company be restricted from operating on US soil. In Australia it has been excluded from bidding to supply the lucrative national fibre network. A similar move is under consideration by Canada.

Mr Cameron’s pledge in late 2010 to double UK trade to China to £62bn by 2015 means the report’s findings could be a game-changer for Britain’s trade ambitions with the new Chinese leader, Xi Jinping, if Huawei is blacklisted. But if Downing Street were to dismiss publicly US, Canadian and EU concerns as unsubstantiated conspiracy theory, Mr Cameron would leave himself open to the charge of keeping Beijing happy at the expense of UK cyber-security.

Read more about China’s relationship with the United Kingdom, via CDT.

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The “blanket prohibition” on meeting the exiled Tibetan spiritual leader – imposed by the Prime Minister’s team during crisis talks over Eurozone countries at a meeting of G20 countries – prompted a fierce backlash from ministers.

The ministers – Tim Loughton and Norman Baker – were barred from attending a private lunch with the Tibetan spiritual leader in the apartment of the House of Commons Speaker John Bercow minutes before it was due to start.

[…] Mr Loughton told the programme that he and Mr Baker had originally been cleared to meet the Dalai Lama on his visit to the UK between 14 and 23 June this year.

[…] The pair said they felt British policy over China was “tantamount to saying that British foreign policy on Tibet is whatever China wants it to be.["]

The Dalai Lama was at least allowed onto British soil. He was also due to visit Taiwan this month, but was refused a visa on the grounds that, as a foreign ministry spokesman told the AFP, “it’s just not a good time”. Meanwhile, a South African court ruled last week that the country’s government had acted unlawfully in effectively blocking his visit for Archbishop Desmond Tutu’s 80th birthday in 2011. From the BBC:

The Supreme Court of Appeal said the former home affairs minister had “unreasonably delayed her decision”.

The government denied it had bowed to pressure from China to block the trip.

In response to the ruling, Archbishop Tutu’s office said it as a “credit to South Africa’s judicial system” and he looked forward to inviting the Dalai Lama to South Africa for his 90th birthday.

Dispatches also examined the lobbying efforts in Britain of beleaguered Chinese telecom giant Huawei, which has spent over £90,000 over the last two years on travel for MPs and donations to political parties. Former defence and foreign secretary Malcolm Rifkind is currently leading a parliamentary review into the company’s presence in the U.K., and is due to submit his final report before Christmas.

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Although the report — at least the unclassified version — is full of sound and fury, it is almost devoid of anything conclusively connecting Huawei and ZTE with the charges levied against them. The 11-month investigation, which Huawei requested, starts from the presumption of guilt and works backwards from there: All its conclusions are based on the suspicion of wrongdoing. As 60 Minutes reported two-thirds of the way into its segment on Huawei this past Sunday, almost as an afterthought, “[T]here’s no hard evidence” that any of the espionage allegations are true.

It seems that the House intelligence committee’s response to potential cybersecurity threats has been to circumvent the Bill of Rights using “national security” as an excuse, while the committee avoided the most effective solutions — like examining the two companies’ code and vulnerability testing all foreign-made communications equipment — that would make the nation’s communications infrastructure safer.

…

The consequences for ignoring the issues surrounding Huawei and ZTE are serious, and the U.S. government should prevent government agencies from entering into contracts that could harm the United States. And the U.S. government has good reason to fear the Chinese government’s connection to Huawei and ZTE from past experience: Even if their equipment is perfectly safe now, it could be turned against the United States in the future.

But the U.S. government, along with House Intelligence Committee chairman Rep. Mike Rogers, have effectively blacklisted Huawei and ZTE, even though the two companies have not been convicted of — let alone charged with — any crimes. Rogers even called into question the patriotism of any company doing business with Huawei, telling 60 Minutes, “If I were an American company today… and you are looking at Huawei, I would find another vendor if…you care about the national security of the United States of America.”

Both Huawei and ZTE have pushed back against the charges contained in the report, and a Monday China Daily opinion piece railed against the “hypocrisy” of American politicians:

The accusation that the two Chinese companies pose a security threat to the US is based on the assertion that they cannot be trusted to be free of State influence, a subjective judgment with no credible evidence to support it. Coming from a so-called intelligence panel, this is not very intelligent at all, since the US government has publicly and repeatedly recognized China as a partner, rather than an enemy. It is impossible for any company in the world to be entirely free of sate influence, including US companies, does that make them all a security threat to the US?

There are a lot of US companies operating in China, which have very strong links to the US government, such as Boeing and Motorola, yet the Chinese government has never called for the exclusion of these companies from the Chinese market. As a matter of fact, the Chinese authorities have tried their best to facilitate their operations.

The two Chinese companies that are alleged to pose a security threat to the US, operate in about 150 countries as welcome and respected partners without any problems.

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Given the typically close cooperation between the United States and Britain on security issues, the trans-Atlantic divide over Huawei and another Chinese equipment provider, ZTE, is striking. On Monday, the Intelligence Committee of the U.S. House of Representatives branded the companies security threats and raised the possibility that their gear could be used to spy on American interests if used in U.S. telecommunications networks.

Huawei has rejected the allegations as “little more than an exercise in China bashing and misguided protectionism.”

By contrast, said Roland Sladek, a spokesman for Huawei, “Europe is almost like a second home market for us.”

And for good reason. Huawei means jobs and investment for Britain and, more broadly, for Europe. The company already has 800 employees in Britain and a research center in Ipswich. The investment announced by Mr. Ren is expected to create 700 jobs in five years and additional technical centers in the country. In all, the company has about 7,300 employees in Europe.

At the same time, Reuters’ Paul Sandle reports that Britain is scrutinizing Huawei’s relationship with its largest telecom operator, BT Group:

Huawei established an cyber security evaluation centre in Britain two years ago with security-cleared staff to test the company’s hardware and software to ensure it can withstand any cyber security threats.

The government said the centre helped ensure the security of Britain’s telecom networks.

“The evaluation centre obviously works very closely with UK government security specialists, and that allows us to satisfy ourselves as well that the equipment coming into the UK meets our standards,” a government Cabinet Office spokesman said.

Rifkind, however, said the committee would look at why the centre was needed, how it was working, and what conclusions could be drawn from the way it was operating.

See also previous CDT coverage of Huawei, including the report released this week by the U.S. House of Representatives which asserts that the Chinese telecom giant could potentially pose a national security threat.

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2. It won’t help CNOOC in the South China Sea.

After CNOOC announced its plans to buy Nexen, the Wall Street Journal and Reuters published articles asserting that Nexen’s operations in the Gulf of Mexico would provide CNOOC with deepwater drilling expertise applicable to disputed areas of the South China Sea. This vast body of water, potentially rich in oil and natural gas, is the subject of overlapping claims to territory and maritime rights by six governments, including China’s.

The argument is that CNOOC’s deployment of its newly acquired deepwater expertise to these areas could increase instability in the region and might prompt other claimants to further entangle the United States in a territorial dispute; therefore, CNOOC’s takeover of Nexen is inimical to American interests. CNOOC itself hasn’t helped matters. In May, the company’s chairman, Wang Yilin, said large deepwater drilling rigs are “mobile national territory” and a “strategic weapon” for developing China’s offshore oil industry.

Nexen, however, does not possess the technical capabilities that CNOOC needs to operate in the deep waters of the South China Sea. The Canadian firm is a newcomer to deepwater exploration and production. It does not own any drilling rigs and relies on outside contractors to perform most of the technical work involved in exploring and developing its acreage in the Gulf of Mexico — contractors that CNOOC could legally hire anytime it wants. In any case, the geological differences between the Gulf of Mexico and the South China Sea limit the portability of U.S.-gained expertise.

Downs also explains why CNOOC’s investment would give the U.S. leverage over Iran, not threaten the continued flow of Nexen’s oil to the U.S. and, perhaps most importantly, would signal that the U.S. is open to accepting capital from Chinese companies eager to provide it in America.

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A failure to agree on these norms is destabilizing. One country may see its action as permissible, the other as an act of war. It is unclear how wedded Beijing is to its opposition to cyber and LOAC, and we could begin to see some modification of the Chinese position. Wang Tianlong of the China Center for International Economic Exchanges writing in the Shanghai Securities News recently argued “we should study the feasibility of applying the principles of the Law of Armed Conflict to cyberspace and push for the formulation of a code of conduct for cyberconflict.”

The United States has certainly upped its rhetorical pressure on China over the last year. The more open discussion of offensive cyber has been accompanied by the increasing number of U.S. government officials naming and shaming Chinese hackers (the most recent is Rear Admiral Samuel Cox stating that the pace of attacks was actually increasing). Secretary Clinton and Secretary Panetta both raised cyber with their Chinese counterparts during recent meetings.

The most important driver may be that Beijing could soon find itself isolated. Russia has been much more receptive to discussing how LOAC applies to cyber, and has been less adamant about the International Code of Conduct in multilateral meetings recently. The United States needs to keep engaging Beijing on this issue, but, as with so many issues, it is likely to get better traction with China by scheduling more meetings in other countries’ capitals.

Cybersecurity has become a flashpoint in Sino-US relations over the past year, with Washington claiming late last year that they had linked a bulk of China-based cyberattacks against America to groups backed or directed by the Chinese government. From compromised intellectual property to the potential theft of state secrets, experts in the U.S. have also called on President Barack Obama to take more forceful measures to tackle the issue. And most recently, a year-long U.S. House intelligence committee concluded that Chinese telecom giant Huawei poses a security risk to America, allegations which the world’s largest manufacturer of telecom equipment has denied.

See also previous CDT coverage of Huawei, cybersecurity and cyber espionage.

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The year-long investigation by the House intelligence committee concluded the firm, Huawei Technologies Inc., and a second firm, ZTE Inc., pose security risks to the U.S. because their equipment could be used for spying on Americans.

In a report to be released Monday, the committee recommends that the U.S. block acquisitions or mergers involving the two companies through the Committee on Foreign Investments in the U.S. It also recommends that the U.S. government avoid using equipment from the firms, and that U.S. companies seek alternative vendors for telecommunications equipment.

The report is likely to add to tensions with China. American military and intelligence officials have long been warning privately that China poses a cyberespionage threat to U.S. defense systems and companies. Government officials have been reluctant to voice those concerns publicly for fear of angering China. That has begun to change, and the House report represents the most direct statement of concerns about specific Chinese companies.

CBS investigative news magazine 60 Minutes featured a segment on Huawei in tonight’s episode, in which they interview Bill Plummer, Huawei’s U.S. vice president of external relations:

Steve Kroft: One national security expert said that if you build a network like this in another country, you basically have the keys to intercepting their communications. Is that a true statement?

Bill Plummer: Part of that might be a little bit fantastical. But you know, Huawei is a business in the business of doing business — $32.4 billion in revenues last year across 150 different markets, 70 percent of our business outside of China. Huawei is not going to jeopardize its commercial success for any government, period.

Steve Kroft: What’s the relationship between Huawei and the Chinese government?

Bill Plummer: We have a Beijing office. So, you know, we’re a regulated industry the same as we are here. You need to be able to interface with government.

Steve Kroft: So you’re saying the Chinese government has no influence over Huawei.

Bill Plummer: We’re another business doing business in China.

Watch the full 60 Minutes segment here:

Listen also to a Sinica Podcast segment on Huawei from September and read a post by Bill Bishop of Sinocism on suspicions of Huawei in light of U.S. plans to build surveillance technology into telecom networks in Afghanistan.

Read more about Huawei from CDT, including a post from August, “Who’s Afraid of Huawei?”

Update 8:20 am PST: Huawei has issued a statement in response to the House Intelligence committee report. An excerpt:

The United States is a country ruled by law, where all charges and allegations should be based on solid evidence and facts. The report conducted by the House Permanent Select Committee on Intelligence (the Committee), which took 11 months to complete, failed to provide clear information or evidence to substantiate the legitimacy of the Committee’s concerns.

We had hoped to ensure that the investigation would be fact-based and objective in its review of our business activities and the global issue of cyber-security. Over the past 11 months, Huawei has cooperated with the Committee in an open and transparent manner, and engaged in good faith interaction: our top management team carried out multiple rounds of face-to-face communication with the Committee members in Washington D.C., Hong Kong, and Shenzhen; we opened our R&D area, training center, and manufacturing center to the Committee and offered a wealth of documentation, including the list of members of the Board of Directors and the Supervisory Board over the past 10 years, and the annual sales data since our establishment in 1987; we also made the list of our shareholding employees, the shares they hold, as well as information about our funding resources and financial operations available to the Committee. We adopted a transparent approach in providing this information to ensure the results are fact-based and unbiased, hoping the Committee’s objective review of our business activities and the global cyber security issue can clarify the misperception of Huawei.

See also the full report from the House Permanent Select Committee on Intelligence, “Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE.”

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: espionage, huawei, surveillance, Telecom, U.S trade
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Critics are convinced that there is more to Huawei’s rise than strategy, guts and Mr Ren’s devotion to innovation. They think it has stolen vast amounts of intellectual property and that it has been heavily subsidised in its expansion by the Chinese government, eager to use it as a Trojan horse with which to infiltrate itself into more and more foreign networks. Huawei rejects all these allegations.

[...]Then there is the question of whether China’s government bankrolled Huawei’s undercutting of its rivals. In 2011 Huawei acknowledged that its customers did benefit from access to $30 billion in potential “export financing”, though apparently only a fraction of that has been used. Pressed for details, the firm says that “in 2011, the financial support that Huawei provided to customers came to 5.86% of total contract sales,” a figure not specified.

[...]This leaves the most troubling criticism: that the firm might be a creature of China’s security services. Mr Ren’s past in the PLA fuels such suspicions, as does a reasonable perception that privately held Chinese companies are often in cahoots with the powers that be. The firm’s dealings with unsavoury regimes such as Iran, where its salesmen boasted that their equipment makes it easier to spy on potential troublemakers, are taken as supporting this view.

The second article from The Economist has more on the US congressional committee, and explains why a ban on Huawei would be a mistake:

Arguments against imports always need to be viewed with caution, since they will be used by protectionists to keep emerging rivals out. Still, it is reasonable to worry about security in telecoms: recent reports have pointed to the efforts of Chinese state-sponsored hackers to vacuum up valuable Western commercial secrets on a massive scale. [...]

But banning Huawei from bidding for commercial contracts is wrongheaded, for two reasons. One is that the economic benefit of competition from China in general and Huawei in particular is huge. It boosts growth and thus wellbeing. Huawei’s cheap but effective equipment helped make Africa’s mobile-telecoms revolution possible.

The other reason for not banning Huawei is the dirty little secret that its foreign rivals strangely neglect to mention: just about everybody makes telecoms equipment in China these days. Chinese manufacturers and designers have become an integral part of the global telecoms supply chain. Blocking Huawei (or its rival Chinese telecoms giant, ZTE) while allowing gear from, say, Alcatel-Lucent or Ericsson on a network may make politicians feel good. But it is no guarantee of security. Huawei’s competitors have a vested interest in hyping concerns about it, while disguising their own reliance on Chinese subcontractors and on subsidies.

Last month, in response to the congressional committee and in effort to prove its commitment to security, Huawei hired an American cybersecurity strategist and former Homeland Security officer as its chief security officer.

T-Mobile has switched to Huawei made handsets for their MyTouch smartphones, and a review in Wired has drawn attention to their outdated specs. Also see a more favorable article from the Nation outlining Huawei’s Ascend series of smartphones.

For more on Huawei, see prior CDT coverage.

© josh rudolph for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: cyberespionage, cybersecurity, espionage, huawei, ICT, telecommunications
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