New signals from embattled telecoms equipment giant Huawei indicate the company may be seeking a new "middle road", as it tries to ease western concerns that its products could be used for spying by Beijing. This subtle but perhaps significant shift is coming in the form of a press release just issued by Huawei, in which it says Australian Prime Minister Julia Gillard encouraged the Chinese company to expand its commercial business in Australia during a trip to China this week.
While the announcement itself seems rather bland and pro forma on the surface, it does seem to draw an important distinction that says Huawei is welcome to sell its products to private businesses in Australia even as the government won't buy such products due to national security concern. That could be good news for Huawei and crosstown rival ZTE (0763.HK; Shenzhen: 000063), which worry that their core telecoms networking products could be banned completely from lucrative western markets.
To completely understand this latest development, we need to backtrack about a year when Australia formally banned Huawei from bidding to help build a US$38 billion national broadband network being coordinated by the government. In that case, Australian officials were quite direct in saying their decision stemmed from concerns that Huawei could install backdoors and other spying channels into its equipment to be used for spying by Beijing.
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The national security issue came to a peak last October, when the US government issued a report saying equipment from Huawei and ZTE posed a national security risk. The US government went one step further and banned the use of Chinese equipment not only in government networks but also in privately-owned ones operated by domestic telcos like Verizon (NYSE: VZ) and Sprint (NYSE: S).
Australia's newly clarified stance could become a good template for other western countries to follow
After the US move, more reports came out saying other major western markets like Canada and Western Europe were considering similar actions due to national security concerns. Against that backdrop, this latest pronouncement by Australia's prime minister seems like an attempt to clarify the issue.
