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August, 2018

Huawei and ZTE shut out of Australia's 5G market

Original article: Sina

Australia has banned Chinese telecoms giants Huawei and ZTE from providing the country with 5G technology. In a statement, the Australian federal government cited national-security risks as the reason for the ban. "Chinese companies" would pose an unacceptably high security risk, the statement said, without explicitly naming Huawei or ZTE. Huawei said in a Twitter statement that the Australian government had been in touch to spell out the ban explicitly. 

Analysis:

We can't say Canberra's decision surprises us. Poor corporate governance has consequences, especially when firms want to expand globally. Despite being among the world's largest telecommunications providers, both Huawei and ZTE are associated with unscrupulous business practices: everything from selling equipment to rogue states to allegedly acting as corporate arms of the Chinese state. Given that Huawei's founder is linked to the Chinese military and that the firm operates in a highly strategic industry, it ought to be more forthcoming, but Huawei has never put a premium on transparency. 


Lawmakers from both Australia's Conservative and Labor Party worry that ZTE and Huawei might be obliged to assist Beijing with intelligence work following the passage last year of China’s National Intelligence Law. The law compels “all organizations and citizens” to support the country’s intelligence work. The Sydney Morning Herald points out in an August report that Article 38 of China's Cyber Security Law requires telecoms companies to inform the government of any vulnerabilities they detect. 


In statement to ZDNet, Huawei said: "We have been informed by the government that Huawei and ZTE have been banned from providing 5G technology to Australia. This is an extremely disappointing result for consumers."


Australia's telecoms community criticized the government's move, citing the chance of higher costs. One source told The Australian that Huawei's prices would be hard to beat. Ericsson and Nokia, both based in Sweden, would likely be pricier. TPG Telecom chief operating officer Craig Levy told The Australian that the ban "limits competition" and thus "is not good for the industry as a whole." 


Chinese media reports also say that Huawei's competitors will benefit. "Maybe this is not really a security issue," Sina Finance says in an August 24 commentary. "The Australians will end up paying more for inferior quality services." 


The commentary pans Australia for "stabbing China in the back at a crucial moment in the Sino-U.S. trade war." Australian went "even further than the United States" by banning the use of Huawei's 5G telecoms equipment, rather than recommending not to use it. 


The commentary warns that Canberra has "tested Beijing's bottom line" by banning Huawei from the Australian 5G network. "If China cannot defend the legitimate rights and interests of Chinese companies, there will inevitably be a domino effect in which more countries challenge China's bottom line." 


That's already happening. Cutting off Huawei and ZTE from Australia's 5G network is part of a wider pushback in advanced economies against China's bid to dominate strategic infrastructure and next-generation technologies. Indeed, Beijing's techno-nationalist industrial policy Made In China 2025 has set off alarm bells worldwide. Even Germany, which had greenlighted several big-ticket Chinese investments in strategic German companies, is pushing back. Berlin recently blocked a Chinese state-backed firm from investing in the German electrical grid.

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