The arrests of key figures at the telecoms giant Huawei has put the spotlight back on the firm's links with the Chinese state and the security of its technology. Simon Wilson reports.
The arrest of Meng Wanzhou, the chief financial officer of Chinese telecoms giant Huawei, and the daughter of its founder, Ren Zhengfei, has highlighted growing fears in the West about China's ascendancy in advanced technology sectors that will increasingly underpin the global economy. Meng's arrest (in Vancouver, on a US arrest warrant) is not related to corporate espionage, let alone state espionage.
Rather, she is accused of using a Huawei subsidiary called Skycom to evade US sanctions on Iran between 2009 and 2014. US prosecutors allege she publicly misrepresented Skycom as being a separate company from Huawei, and deceived banks about the true relationship between the two companies. But although the Meng case is not about spying, it reflects a growing unease among Western policymakers that has been brewing for years. Should the West trust a Chinese telecoms giant to supply us with critical infrastructure?
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How big is Huawei?
It's the world's biggest supplier of telecoms equipment (ahead of Ericsson and Nokia, as well as ZTE and Samsung) with revenues last year of JP603bn (£67.7bn) and profits of JP47.4bn(£5.3bn). Its core business is making the networking equipment that makes mobile-phone masts work, the network switches that connect phone networks and the software to control them.
But in recent years it has massively grown its consumer-facing business, overtaking Apple as the number two maker of smartphones for the past two quarters. In the UK, BT uses Huawei systems extensively, though not in its central network and it's removing them from the core of the mobile network EE, which it bought in 2016. But despite its status as a successful global company, there are fears over the closeness of Huawei's links with the Chinese state.
What links are there?
One concern is the role of the founder, Ren, who is routinely described as a "former officer" in the People's Liberation Army. In fact, says James Titcomb in The Daily Telegraph, as a young engineering graduate Ren was initially unable to advance his career by joining the Communist Party due to his father's right-wing connections.
And although he served as a researcher and engineer in the People's Liberation Army from 1974, he never gained a military rank, and left in 1983 after cutbacks. Nevertheless, the fact remains Huawei was founded and is still run by an expert in Chinese military communications technology.
Is Huawei an arm of the Chinese state?
No, but its ownership structure is notoriously opaque. It's not a state-owned enterprise, but nor is it a private company in the normally understood sense. What's clear is that Huawei has been China's designated "national champion" for telecoms since 1996, and its rise to dominance is a matter of national strategic interest. What is also clear is that China's drive, under President Xi Jinping, to reaffirm and strengthen state control and obedience to the party at all levels has unnerved Western governments when it comes to dealings with infrastructure-critical projects.
What kind of state control?
Specifically, the new National Intelligence Law adopted last year compels all "organisations and citizens" to "support, co-operate with and collaborate in national intelligence work" and promises state protection for those that do so. That's raises obvious question marks over the ability of even a well-intentioned firm to resist government pressure. "Given America's government is not above implanting bugs into kit made by its own technology firms", says The Economist, it "would be a leap to assume that Chinese intelligence services were not at least exploring similar possibilities".
In addition, Huawei has been caught up in a backlash against Beijing's "Made in China 2025" industrial policy, the stated goal of which is for China to have 90% control of the lead technologies of the 21st century AI, robotics, biotechnology and so on. That has focused minds in the West, in particular in the US, where Chinese dominance in telecoms has been officially viewed as a national security issue since 2012.
What's the core worry?
The key issue for Western policymakers and spooks is that 5G (fifth-generation mobile communications technology) will massively increase the risks of relying on a potentially hostile superpower to supply our kit. "5G is key to enabling the internet of things (IoT) which will in itself provide a greater range of opportunities for attackers," explains Ewan Lawson of the Royal United Services Institute.
In November, US officials toured Europe to warn friendly governments against using Huawei equipment. Australia and New Zealand have both joined the US in banning government entities, and those who provide services to them, from using Huawei gear. So far, the UK hasn't followed suit, though MI6 chief Alex Younger gave a public speech last week warning that Britain needs to decide how "comfortable" it is with the status quo.
What does Huawei say about all this?
The firm strongly denies any improper links with the Chinese state, and indeed no evidence has ever been found of "back doors" in its products that would allow state-sponsored hackers to eavesdrop on or disrupt another country's communications. Moreover, since 2010, it has allowed cybersecurity specialists from GCHQ to examine and vet its technology at a special facility outside Banbury called the Huawei Cyber Security Evaluation Centre (known as "The Cell").
The HCSEC has been "doing its job and has never found a malicious back door in Huawei technology, and that's exactly what it's there to spot", says ex-GCHQ boss Robert Hannigan. "But it has criticised them for poor engineering and lack of seriousness about cyber-security and told them they must change."
Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.
Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.
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