Germany Recalculating its Approach Towards Chinese Telecom Major Huawei

By IndraStra Global News Team

By IndraStra Global News Team

Image Attribute: Huawei at CeBIT 2015 / Source: Olaf Kosinsky/Skillshare.eu

On January 16, 2019, German news daily Handelsblatt reported that the German government is actively considering to exclude China telecom company Huawei from the buildout of 5G mobile networks by deploying stricter security requirements. There is constant American government pressure on Germany and other EU countries to ban Huawei from bidding for 5G network projects.

Huawei as an organization is suspected in passing sensitive data through "built-in backdoors" to the Chinese state intelligence agencies. However, there is no evidence in the public domain to support such accusation. The company is defending itself against these allegations. Recently, the Bundesverband der Deutschen Industrie (BDI - Federation of German Industries) said accusations that Huawei will "jeopardize national security" needed to be proved before excluding the company from Germany's 5G projects.

Last month, the Federal Office for Information Security (BSI - Bundesamt für Sicherheit in der Informationstechnik), told The Wall Street Journal it was in talks with Huawei to set up security labs in the country that would allow government experts to vet the safety of their equipment.

The company released a statement after the German government's announcement, "We also welcome the approach of verification and standardization of technological solutions publicly communicated by the German Federal Government." The statement further added, "We see no rational reason to exclude Huawei from building the 5G infrastructure in any country in the world."

The change of track comes days after Polish authorities arrested a Huawei sales director Weijing W.  and a former senior Polish security official in that country on January 8, and charged them with spying for China. The news of the arrest was announced on January 11 by Polish security agency and on the following day, Huawei said that Weijing W. was fired from the company and said his alleged action wasn’t related to his employment. The court has ordered three months detention pending further investigation, though both have pleaded not guilty. Neither man’s attorneys were available for comment.

It all started with the passing of a Chinese law 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." and Article 12 notes that state intelligence agencies may "establish cooperative relationships with relevant individuals and organisations, and entrust them to undertake relevant work."

In response to the above context, on December 14, 2018, it was revealed by The Wall Street Journal that at a meeting in Canada in July 2018, espionage chiefs from Australia, Canada, New Zealand, the U.K. and the U.S .— all signatories to a treaty on signals intelligence, and often referred to as the “Five Eyes” — agreed to do their best to contain the global growth of Huawei. This information comes days after the arrest of company CFO Meng Wanzhou in Vancouver, Canada at the behest of American authorities. Who also happens to be Huawei founder Ren Zhengfei's daughter. Recently, Ren Zhengfei broke his public silence when he said "never received a request from a government to provide illegal information." A former major in the People's Liberation Army, Huawei was founded in 1987 and has become the largest telecommunications equipment supplier in the world. As per the current revenue data, Germany is one of Huawei’s most important country in the region of Europe, Middle East, and Africa. In 2017, it got 27% of its $92.6 billion in revenue from that region.  Also, the country hosts Huawei's European headquarters out of Düsseldorf. 

Parallel Development

On January 18, a joint statement issued by Germany and China after the conclusion of the high-level second "China-Germany High-Level Financial Dialogue" in Beijing. According to the statement, released on the website of China's Ministry of Finance;

1. China welcomes qualified German-invested banks in China to apply for depository business licenses for Chinese Depository Receipts－certificates that allow investors to hold shares listed across borders, such as US depository receipts.

2. Both sides welcomed the signing of the Memorandum on D-share Project Cooperation, between the Bank of China and the China Europe International Exchange, supporting the listing of Chinese enterprises on Germany's financial market.

3. Both sides agreed to establish an exchange which will be an important platform for launching China A-shares index derivatives and to support the development of the offshore yuan market in Frankfurt. Through it, German issuers can also issue yuan-denominated bonds and Chinese issuers can list stocks and bonds in Germany.