If Huawei is blameless, it should clear its name

It's no surprise suspicions lurk around the telecommunications firm, given its opaque operations and an atmosphere of international mistrust

PUBLISHED : Wednesday, 10 October, 2012, 12:00am
UPDATED : Wednesday, 10 October, 2012, 9:33am


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Last month one western media report dubbed Shenzhen-based technology giant Huawei "Who are we?"

The joke was a poor one, but it made a serious point. Although Huawei recorded sales of US$16.3 billion in the first half of this year, surpassing Swedish behemoth Ericsson to become the world's leading provider of telecommunications equipment, to outsiders it appears a closed book.

As a private unlisted company, little is known about Huawei's financing, governance or ownership.

Such opacity breeds dark suspicions. This week the intelligence committee of the US House of Representatives wrapped up an 11-month investigation into Huawei and fellow Chinese communications equipment company ZTE by concluding that the two companies "cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States".

In Huawei's case the committee criticised the company's unco-operative attitude and said it did not adequately explain its relationship with the Chinese government and that it "failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements, or management".

As a result, the committee said Huawei should be barred from government contracts and from making acquisitions in the US, and called on American corporations not to do business with the company.

Huawei immediately rejected the findings, protesting that it had co-operated fully with the committee, and that legions of satisfied customers could attest the security of its products.

Nevertheless, even though the committee was no doubt motivated in part by protectionist leanings, the sort of prohibitions it is advocating is both common and - to an extent - justified.

China itself effectively bars foreign companies from doing business in sectors Beijing considers "strategic", including telecommunications. Just last month the European Chamber of Commerce in China lamented the "massive asymmetry in market access" between local and foreign companies in China, due in part to Beijing's professed concerns for national security.

Meanwhile, experience teaches western governments to be wary of Chinese electronic espionage. In a rare public speech in June, Jonathan Evans, head of Britain's MI5 security service, warned that "vulnerabilities in the internet are being exploited aggressively, not just by criminals but also by states".

"The extent of what is going on is astonishing," he added, describing state-sponsored cyber-espionage efforts "with industrial-scale processes involving many thousands of people".

Evans didn't name names, but it's no secret he was referring primarily to China, which has been blamed for thousands of attacks on the computer systems of British government agencies and businesses.

In such an environment of mutual mistrust, a company of Huawei's background - its founder is a former People's Liberation Army engineer rumoured to have been a specialist in signals intelligence - and opacity is bound to come under international suspicion.

Right now there is little more that Huawei can do to allay those suspicions. But in the longer term there is plenty.

A listing on an internationally recognised stock exchange would surely help. Although a Hong Kong listing didn't stop ZTE from coming under suspicion, if Huawei is as blameless as its management insists, exposing the company's governance, ownership and finances to the full scrutiny of international investors and regulators could not do any harm, and would be a valuable first step in rebuilding trust.

Correction: an earlier version of this column referred to the telecom company Ericsson as "Swiss". Ericsson is a Swedish company.