Conflict of interests
This is turning out to be a pivotal year for Chinese telco giant Huawei in terms of its western ambitions. As we already covered, it was second only to Android in terms of presence at MWC last week and it has stayed in the news this week thanks to a couple of high-profile attempted ventures into western markets.
Here in the UK, Huawei has confirmed it's involved in the bidding process to supply the equipment for a mobile communications network on the London Underground already being built by infrastructure giant Thales.
"Due to business confidentiality, we are unable to comment on the project at this point, but we can confirm that we are involved in the bidding process," said a Huawei spokesperson. The UK is an important market for Huawei, and we endeavour of providing secure, technologically advanced communication services to the British people.
"As a world leading telecom vendor, Huawei has a proven track record of providing secure products and solutions to our customers including 46 out of top 50 telecom operators globally. Our newly opened cyber security centre in the UK shows our commitment to ensuring our equipment meets the most stringent security requirements. Huawei is a 100% privately held global company owned entirely by its employees."
Note the continued references to security, independence and global reach. These will have been inserted in response to the opposition Huawei is facing to some of its global ambitions, especially in the US, where protectionism is being dressed up as security concerns.
Alleged ties to the People's Liberation Army are often used among the reasons why it would be a bad idea to let Huawei own pieces of communications companies that are involved in national or state infrastructure. It seems the US government is worried it may be facilitating Chinese spying if it lets Huawei into the domestic market.
This was the reason why US regulators blocked a move for 3Com, in which Huawei was involved, back in 2008, and why the committee on foreign investment in the US (CFIUS) has objected to its acquisition of parts of the bankrupt server company 3Leaf systems. Huawei decided to accept the ruling.
"This was a difficult decision, however we have decided to accept the recommendation of CFIUS to withdraw our application to acquire specific assets of 3Leaf," said the Huawei spokesperson. "Huawei will remain committed to long-term investment in the United States. The significant impact and attention that this transaction has caused were not what we intended. Rather, our intention was to go through all the procedures to reveal the truth about Huawei."
Huawei seems to have become a proxy in an escalating protectionism fight between China and the US. China overtook Japan to become the world's second largest economy last week and, runs a massive trade surplus, owns much of the West's considerable debt and makes many of the products we buy.
The West would be foolish not to scrutinise the business practices of Chinese companies, especially where it suspects direct links to the state, but it's also leaving itself open to accusations of double-standards. Every time the US acts in a way that is perceived by the Chinese as protectionist, this increases the likelihood of retaliatory measures, which could escalate into a full-blown trade war.
In a recent report published on the Chinese Ministry of Commerce website, Huawei and ZTE were specifically referred to in the context of ‘political barriers' preventing Chinese companies, not only from expanding into the US, but importing from the US too. The report is worth a read; apparently the US accounts for 99 percent of China's trade surplus.
But the London Underground bid, in which Huawei is reportedly offering to effectively give away millions of pounds worth of equipment in order to claim a foothold in the UK market, shows how difficult such protectionism is. These sorts of cases are likely to be a regular occurrence, and how they're resolved will have a massive bearing on how the 21st century global economy evolves.
