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Why is Huawei being scrutinised for security reasons?

The arrest of a top Huawei executive has sent stock markets plunging around the world and threatens to derail the tenuous trade truce between the United States and China.

 Meng Wanzhou, chief financial officer of the Chinese tech giant Huawei Technologies, was apprehended in Vancouver on December 1 at the request of US authorities.

A judge accepted Meng’s request to bar both police and prosecutors from releasing information about the case, so additional information about why she was arrested is limited. But the consequences were immediate.

US lawmakers are condemning Huawei, which they say poses a national security threat to the United States. Chinese officials have called for Meng’s release.

An op-ed in the Chinese tabloid Global Times said the United States is just trying to stifle Huawei because it is a business competitor.

Here’s what you need to know: 

What is Huawei?

Huawei is a Chinese tech company based in Shenzhen that sells smartphones and telecommunications equipment around the world. Earlier this year, it became the world’s second-largest smartphone maker, behind Samsung, according to IDC. It sells more phones than Apple (AAPL).

As one of China’s top champions in the tech sector, Huawei plays a key role in the country’s ambitions to become a global tech superpower. The company has been racing to develop 5G technology and is central to China’s plans to dominate the rollout of super-fast wireless networks.

Ahead of the rollout of that faster internet technology, several countries have warned against using Chinese hardware because of security concerns, which stem from the Chinese government’s use of Huawei’s products to spy on people around the world.

 Huawei’s expansion from its Chinese roots into the rest of the world has sparked concerns among Western governments over the company’s close ties to the Chinese authorities, as well as its willingness to export technologies to countries that are under sanction.

Over the past couple of years, Huawei has reportedly circumvented sanctions imposed on North Korea and Iran, providing the countries with telecom equipment that can be used for extensive spying on populations, so-called dual use technologies.

Concerns that Huawei devices pose national security risks have seriously hurt its ability to grow abroad. Intelligence agencies in the United States have said American citizens shouldn’t use Huawei phones, and US government agencies are banned from buying the company’s equipment.

Security concerns have caused problems in the United KingdomNew Zealand and Australia have barred Huawei equipment from its 5G mobile networks. Huawei has denied all allegations that it might be involved in the collection of intelligence for the Chinese government.

The company says its equipment is trusted by customers in 170 countries. And it still performs well, reporting $47.4 billion in revenue for the first half of 2018. That’s an increase of 15% compared to the same period last year.

Who is Meng Wanzhou?

Meng, who is also known as Sabrina Meng and Cathy Meng, is Huawei’s chief financial officer and serves as the deputy chairwoman of Huawei’s board. Notably, she’s the daughter of Huawei’s elusive founder, Ren Zhengfei.

Aside from a brief stint at China Construction Bank, the 46-year-old executive has spent her entire career at Huawei. Her brother, Meng Ping, also known as Ren Ping, works at a Huawei subsidiary, and there was speculation that they were being groomed for succession.

The Huawei founder reportedly shot that down in a letter to employees in 2013, saying his children lacked the vision, character and ambition to lead the company. Under Ren’s leadership, Huawei has become one of the biggest telecommunications companies in the world and has established itself as a leading smartphone manufacturer.

What do we know about her arrest?

A spokesperson for Canada’s Justice Department said only that the United States wants to extradite Meng, and a bail hearing is set for Friday. According to a law enforcement official, the US Justice Department sought the arrest as part of ongoing investigation.

 Huawei said in a statement that Meng was detained by Canadian authorities on behalf of US officials when she was transferring flights in Canada. The company said she faces unspecified charges in the Eastern District of New York.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng,” a Huawei spokesperson said.

The Wall Street Journal reported in April that the US Justice Department was investigating whether Huawei violated US sanctions on Iran. The agency declined to comment Wednesday.

How has China responded?

Meng’s arrest has struck a nerve in China. The country’s Ministry of Foreign Affairs on Thursday called for Meng to be released and for the United States and Canada to explain why she’d been detained.

The city government of Shenzhen, where Huawei is based, put out a similar statement. It said it’s watching the matter closely and calling for Meng to be released “immediately.”

The Global Times said in an editorial that the arrest shows Washington is “resorting to a despicable rogue’s approach as it cannot stop Huawei’s 5G advance in the market.”

It said the move “obviously goes against the consensus” reached by US President Donald Trump and Chinese President Xi Jinping on trade, who met over the weekend in Argentina.

What does this mean for the trade war?

The arrest could jeopardise an already precarious ceasefire in the conflict between the United States and China over trade and technology.

“This type of action will affect the atmosphere around the negotiations — making them less likely to bring a sustainable settlement,” Eurasia Group political risk analysts said in a note to clients.

China’s Commerce Ministry said Thursday it was confident a trade agreement with the United States could still be reached in time to hit a 90-day deadline set by Trump. But the Chinese government is clearly angry about Meng’s arrest. A lot hinges on what Beijing and Washington do next.

A Trump administration official says there is a plan for the United States to seek Meng’s extradition. The view among some officials is that she could be used as leverage with China in trade talks.

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Four countries have officially said they will not allow Huawei to take part in the 5G trials.

United States

The US, China’s biggest competitor both in terms of economy, as well as global intelligence gathering, is afraid that China would have access to sensitive user information, such as location data, and that Chinese technologies could pose a possible threat to critical American infrastructure.

To prevent the Chinese telecom company from gaining too much traction in the US, lawmakers have urged wireless carrier AT&T to reconsider potential deals with Huawei.

In 2012, Huawei and ZTE Corp, another Chinese telecom company, were the subjects of an investigation that looked into whether their equipment could pose a threat to US interests.

That report by US Congress concluded that “Huawei did not fully cooperate with the investigation and was unwilling to explain its relationship with the Chinese government or Chinese Communist Party, while credible evidence exists that it fails to comply with US laws.”

Since then, the US has been on a mission to prevent its allies from using Huawei technology for critical infrastructure, especially focusing on fellow members of the so-called Five Eyes, a group of five English speaking countries (US, Canada, New Zealand, Australia, Great Britain) whose intelligence agencies share information on a large scale.

The US has also tried to dissuade other countries like Germany from allowing Huawei to provide technologies in the near future.

Australia

Australia, part of the Five Eyes group, banned Huawei from providing 5G technology in August of this year, but it did not specifically mention Huawei by name.

In a statement, the Australian government said companies “who are likely to be subject to extrajudicial directions from a foreign government” would no longer be allowed to provide 5G technology, which was clearly directed at the Chinese telecom company.

Currently, Huawei is already providing Australia with its 4G network, but with the introduction of 5G, even more products will be connected to the internet in the near future.

Following Australia’s decision, Huawei said there was no fundamental difference between 4G and 5G architecture and that 5G provides better security for both privacy and security, adding that Australian allegations about security concerns were not based on facts.

New Zealand

In November, New Zealand announced it would take the same measures as Australia following a request by mobile carrier Spark to use Huawei equipment for its 5G networks.

The Government Communications Security Bureau intelligence agency denied that request because 5G technology inherently poses a bigger risk since its mobile internet and mobile phone capabilities are intertwined.

“I have informed Spark that a significant security risk was identified,” GCS Director-General Andrew Hampton said, without going into detail about those risks.

Great Britain

As the second most important member in the Five Eyes intelligence sharing group, Great Britain has been urged repeatedly by its allies to ban Huawei from its 5G infrastructure.

So far the United Kingdom has not officially done so, but its government is debating wether special measures should be taken.

Earlier this week, head of intelligence agency MI6 said he had his doubts about the telecom company.

His comments followed the 2013 Foreign involvement in the Critical National Infrastructure report, when the UK looked at Huawei as part of its critical infrastructure.

That report concluded that although no direct evidence was found that Huawei did anything malicious, considerable risks were involved with having the Chinese company be partially responsible for such critical technologies.

Ahead of any decision by the UK government, British telecommunication company BT announced on Wednesday it would not use Huawei technologies as the backbone of its soon-to-be-deployed 5G network and that it would be removing Huawei parts from its existing 3G and 4G networks.

Canada

Canada is currently looking at the risk Huawei’s technologies could possibly pose. It has been under pressure from its Five Eyes allies to ban the Chinese company from its 5G infrastructure.

According to reports in local media, US lawmakers have been talking to Canadian officials and companies about barring Huawei technology from being implemented in Canada’s new 5G network.

“While Canada has strong telecommunications security safeguards in place, we have serious concerns that such safeguards are inadequate given what the United States and other allies know about Huawei,” Senators Mark Warner and Marco Rubio wrote in a letter to Canadian Prime Minister Justin Trudeau according to Reuters news agency.

However, according to Canadian media, telecom companies so far have not said whether they will ban Huawei equipment.

In September, the Communications Security Establishment (CSE) intelligence agency said it had been conducting tests on Huawei equipment for several years to see if they pose any danger to the country.

“CSE provides advice and guidance to mitigate supply-chain risks in telecommunications infrastructure upon which Canadians rely, including, since 2013, a programme that has been in place to test and evaluate designated equipment and services considered for use on Canadian 3G and 4G networks, including Huawei,” the CSE told the Globe and Mail in a statement.

Germany

Germany currently uses Huawei technology but has not yet decided on its future is a key ally of the Five Eyes intelligence group.

Last month, senior German officials said they are planning a last-ditch drive to convince the government to consider excluding Chinese firms such as Huawei from building the country’s 5G infrastructure.

“There is serious concern. If it were up to me we would do what the Australians are doing,” one official told Reuters news agency.

This push is being led by the foreign and interior ministries after they held talks with their US and Australian counterparts.

So far, no decision has been made by Germany, but according to one lawmaker a ban could be on the horizon.

“But we need to be able to vet individual cases in order to ensure our critical infrastructure is protected.

That could lead to the exclusion of Chinese firms from building our 5G infrastructure,” Katharina Droege, a Greens lawmaker said following the push to ban Huawei.

Italy, Japan, India

The US has also been talking to Italy and Japan, two countries who currently use Huawei in a lot of their infrastructure.

According to a report by the Wall Street Journal, the US has communicated its security concerns over 5G equipment manufactured by Huawei.

In September, Indian media also reported Huawei was banned from participating in 5G trials in the country, but shortly afterwards Huawei and India both said the company had been invited to test its equipment in the second-largest mobile market in the world.

 

 

– CNN/Al-Jazeera 

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