Author : Manoj Joshi

Expert Speak Raisina Debates
Published on Jan 19, 2019
The Huawei issue, and dilemma before countries like India The tussle between the West and China over trade and technology is not likely to end soon. However, China is now facing a concerted counter-attack on this front. At the cutting edge, this is being felt by the telecom giant Huawei, whose Chief Financial Officer Meng Wanzhou was arrested in Canada last month. In an interview with The New York Times, its reclusive chief Ren Zhengfei rejected allegations against his company and praised President Trump. He said that he loved his country and the Communist Party, “But I will never do anything to harm any country in the world.” <1> In July 2018, spy chiefs of what is called the “Five Eyes” alliance of the US, UK, Canada, New Zealand and Australia met in Canada and agreed that they needed to contain Huawei. Since then there has been a systematic campaign and lobbying effort to highlight the risks associated with working with the Chinese company.<2> Actually, Huawei has already been shut out of the US market after a 2012 report of the US House Intelligence Committee which had concluded that Chinese owned Huawei and ZTE were a national security threat because of fears that their equipment could intercept communications in the US and to their ties to the Chinese government. Both companies had strongly defended their record at the time.<3> In January 2018, US giant AT&T dropped a deal to sell Huawei’s new smartphone Mate 10. The phone with an advanced screen and a special AI microchip was meant to showcase the company’s cutting edge product costing an eye-watering $ 1000.<4> Earlier, in 2016, the US Commerce Department demanded that the company turn over all information of the export or re-export of American technology to Cuba, Iran, North Korea, Sudan and Syria. Later, the US Treasury Department, too, issued a subpoena to the company. The company was not specifically accused of any wrongdoing, though its smaller counterpart ZTE pleaded guilty to breaking US sanctions and was fined $ 1.19 billion. <5> The rise of Huawei, the Chinese telecom giant, has been spectacular and from the outset it has been dogged by the charge that its reclusive founder Ren Zhengfei was once a member of the PLA. Today, with 180,000 employees, it has become the world’s largest manufacturer of telecom equipment with an estimated annual sales of $ 100 billion. The company has invested heavily in R&D  and has emerged as a world leader in the 5G segment. The heart off the current American concerns lie in the fact that the company is seeking to establish itself as the dominant global 5G company. In 2016, the company was active and positioned itself in a lead role in setting up standards for 5G technology which would have implications for the next generation of industrialisation which would feature the internet of things.<6> It was this that led to the US blocking Broadcomm’s takeover of Qualcomm saying that the takeover could “impair the national security of the United States.” <7> The Trump Administration also proposed that the US government build and operate a centralised 5G network in an effort reminiscent of the project to get man on the moon.<8> Several countries of Europe, like Norway, are considering whether they should exclude the company from building 5G network because of worries about espionage. In UK, BT is removing Huawei equipment from existing 3 and 4G networks and will not use any of the key parts from Huawei for its 5G network. In fact, all of the “Five Eyes” countries — US, UK, Canada, Australia and New Zealand — are now committed to exclude Huawei from their 5G network plans. Japan too banned Huawei from getting government contracts. However, Germany, and to an extent France, have hesitated to follow the “Five Eyes” approach. Neither of them have issued any policy guidelines to restrict the use of Huawei equipment for 5G purposes. However, both of them have been subject to US lobbying against the company. <9> Pressure against Huawei is also building up in countries like the Czech Republic where the intelligence service has warned against the activities of the company and the danger of using its software, and a controversy developed over the Prime Minister seemingly apologising for this.<10>  There have been echoes of this in Poland as well where the Prime Minister has recently spoken about the need to maintain “deterrence” against China and Russia, and whose foreign ministry issued a statement in December 2018 raising concerns about cases of cyber espionage, “including those attributed by our partners to China.” <11> Over the New Year, Polish authorities arrested two people, including a Chinese employee, of Huawei for spying for Beijing. A court ordered them to be held for three months, though both have pleaded not guilty.<12> According to Wall Street Journal, Poland has been Huawei’s biggest market in central and eastern Europe and last year the government had designated the company as the official partner of its 5G strategy. The prime minister’s office had also said that the company would build a science and technology centre in the capital, in addition to the R&D facility it already runs there.<13>

India and Huawei

India, meanwhile, has struck an independent course by allowing Huawei to participate in field trials of 5G equipment, despite reservations. Indian agencies have at various times flagged concerns over the use of Chinese-made telecom equipment in Indian networks. However, Indian companies have found that Chinese-made equipment is the key to their ability to provide the services they do at the prices that are, perhaps, the lowest in the world.<14> Huawei has been active in India for decades. In 1999, it set up an R&D centre in Bengaluru which has been deemed to be the biggest overseas facility run by the company. The facility with some 4,000 engineers is involved in a range of activities, including cutting-edge software in emerging technologies. <15> Huawei’s 4G smartphones are being widely used in India with Honor being touted as one of the largest selling phones. <16>

Looking to the future

Despite charges that its equipment can facilitate interception, no one has yet proved this to be the case. In the 2012 Congressional hearing, executives from Huawei and ZTE denied that they were controlled by the Chinese government. The problem really arises from the nature of the relationship between the state and private enterprise in China. Party committees are now mandatory in all private sector companies. In any case, many of them are linked to the state through state sector banks, state-backed funds and special purpose vehicles. Chinese companies cannot avoid the bad rap they get because of the numerous instances of cyber-espionage carried out by the state entities. The company itself has denied every instance cited by its critics. Now there is a bigger problem in the form of a Chinese law, passed by the National People’s Congress in November 2017, that mandates cooperation of Chinese individuals and entities in the intelligence work of the state.  Article 7 of the National Intelligence Law of the People’s Republic of China states that “All organisations and citizens shall, in accordance with the law, support, cooperate with and collaborate in national intelligence work.” Article 12  notes that state intelligence agencies may “establish cooperative relationships with relevant individuals and organisations, and entrust them to undertake relevant work.” <17> While it is more than likely that the Huawei issue could well split the world into two technology standards for 5G equipment, for countries like India, there is a genuine dilemma because of the price-sensitive nature of its market. As for espionage, the country cannot avoid vulnerability to Chinese or Western suppliers since it imports most of its telecom equipment. What it can do, however, is to develop protocols and tests to examine this equipment to its own satisfaction. But were there to be a rebordering of the world into two different economic and technological spheres, India along with other developing countries could be a loser.
<1> Raymond Zhong, “Huawei’s reclusive founder rejects spying and praises Trump”, New York Times Jan 15, 2019. <2> Rob Taylor and Sara Germano, “At gathering of spy chiefs, U.S., allies agree to contain Huawei”, Wall Street Journal updated on December 14, 2018. <3> Bloomberg News, “Chinese telecom executives deny government control at US hearing”, New York Times, September 14, 2012. <4> Paul MOzur, “AT&T drops Huawei’s new smartphone amid security worries”, New York Times Jan 9, 2018. <5> Paul Mozur, Huawei, "Chinese technology giant, is focus of widening US Investigation”, New York Times, April 26, 2017. <6> Louise Lucas and Nic Fildes, “Huawei to help set 5G standards”, Financial Times November 30, 2016. <7> Elsa Kania “Much ado about Huawei (part 1)” The Strategist (ASPI) March 27, 2018. <8> Maegan Vazquexz, Joshua Berlinger and Betsy Klein, “FCC chief opposes Trump administration 5G network plan",  CNN Politics January 30, 2018. <9>Huawei claims Germany, France and Japan using its 5G products”, Asia Times December 22, 2018. <10> "Documentary: What NUKIB writes in Huawei’s warning”,,  December 27, 2018. <11> "Poland MFA statement on commercial cyber espionage”, Twitter December 21, 2018. <12> Charles Riley and Antonia Mortenson “Huawei executive arrested in Poland on spying charges”, CNN January 11, 2019 <13> Drew Hinshaw and Dan Strumpf “Chinese Huawei executive is charged with espionage in Poland”, Wall Street Journal, January 11, 2019 . <14> Amitendu Palit, “India took right call on Huawei”, Financial Express December 27, 2018. <15> <16> Abhishek Baxi, “Huawei is finally making a significant dent in the Indian smartphone market”, Forbes April 30, 2018. <17> Elsa Kania, "Much ado about Huawei (part 2) The Strategist (ASPI)"  March 28, 2018.
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Manoj Joshi

Manoj Joshi

Manoj Joshi is a Distinguished Fellow at the ORF. He has been a journalist specialising on national and international politics and is a commentator and ...

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