As US and allies shun China’s Huawei, all eyes on holdout Britain

  • Britain’s largest mobile provider scrubs China’s Huawei from 4G network
  • Follows warning from head of MI6 about potential threat Huawei poses to national and corporate security
PUBLISHED : Thursday, 06 December, 2018, 6:01pm
UPDATED : Thursday, 06 December, 2018, 6:56pm

Britain’s government may be asking itself the difficult question this week: what to do about Huawei?

The announcement Wednesday by BT, Britain’s largest mobile provider, that it was removing the equipment of the Chinese tech giant from its 4G cellular network, has taken some gloss off the much-heralded Sino-British “golden era” that would coincide with the UK’s departure from the European Union.

Earlier this year, Huawei hosted Prime Minister Theresa May in Beijing and promised to spend £3 billion (US$3.8 billion) on procurement in Britain to help boost UK export markets to China.

The deal was heralded as a success for a post-Brexit UK looking to prove it is an important trading partner to the rest of the world.

That happened despite the UK coming under increased pressure to restrict Huawei from supplying its 5G mobile network.

New Zealand, Australia and the US have banned the company over national security fears. Britain is a member of the so-called Five Eyes alliance and shares intelligence with those countries.

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“The UK government said the value of trade with China is worth more than the relative risk,” said Ewan Lawson, Senior Research Fellow for Military Influence at the Royal United Services Institute.

That comment may come as some comfort to Huawei which was dealing with a crisis on the other side of the Atlantic: the shock arrest in Canada of its chief financial officer Sabrina Meng Wanzhou.

The arrest of Meng, who faces extradition to the United States for what The Globe and Mail reported was linked to US sanctions on Iran, angered China just as Washington and Beijing agreed to a ceasefire in their trade war.

With Brexit looming, the UK government may not want to upset Huawei or China for fear of losing trade and investment.

Huawei has been in Britain for more than 17 years, with its equipment checked and monitored by a special company laboratory overseen by the government and the surveillance agency GCHQ. Huawei has said Beijing has no influence over its operations.

But comments on Monday by Alex Younger, head of Britain’s spy agency MI6, that singled out Huawei as a potential security risk, were significant.

“We need to decide the extent to which we are going to be comfortable with Chinese ownership of these technologies and these platforms in an environment where some of our allies have taken quite a definite position,” he said.

“It’s not wholly straightforward.”

Two days later, BT said it had been in the process of removing Huawei equipment from instrumental parts of its 3G and 4G mobile networks since 2016. It said it was restricting, but not halting entirely, Huawei’s involvement in its 5G network.

Huawei said BT’s move was “a normal and expected activity”.

What isn’t certain is the outcome of Britain’s ongoing Brexit saga and May’s future as leader.

May lost three crucial Brexit votes in the House of Commons Tuesday and became the first UK government in history to be found guilty of contempt of parliament over her handling of Brexit.

The divorce deal she struck with the EU is increasingly unlikely to pass, a second referendum on the matter is now a distinct possibility and Brexit might not happen.

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At China’s embassy in London, diplomats may be having difficulty deciding which is longer, a week in politics, or one in “telecom geopolitics”.

So where do the upheavals of the past week leave the UK and China’s “golden era”?

Chinese investment in the UK has increased substantially since the referendum vote.

According to a white paper published in November by the Dutch consultancy the TMF Group and the China Britain Business Council, Chinese investment in the UK increased to US$20.8 billion in 2017 compared to US$9.2 billion a year earlier.

But much of that has been due to the UK’s “golden visa scheme”, and a fall in the pound – on Brexit concerns – making property in the UK much cheaper than in similar markets.

“In the EU Britain has been the biggest recipient of Chinese foreign direct investment – in property but not only,” said George Magnus, an economist and Associate at Oxford University’s China Centre.

But he believes that has been because of the UK’s membership of the EU.

“The Chinese have seen Britain as the doorstep to the European Union market, they like the language, the time zone.

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“There is a school in China that sees Brexit as a threat ... as the EU is a big and important trade partner. They [the Chinese] could see the advantage in the UK on its own. But I think they would prefer the EU in a stable relationship with Britain.”

Even if the UK does leave the European Union next March 29, a fully-fledged independent trade deal with China could still be several years away.

“Just look at the success Germany has had with China. You don’t need a free-trade agreement, just do it efficiently,” Magnus said.

The view from the East London offices of Chinese property developer ABP is one that stares into the future.

ABP beat off competition to develop a £1.7 billion smart business city for Asian technology companies in the Royal Albert Docks where in the Victoria era ships used to arrive carrying tea from China.

It was the first dock in the world to have electricity.

Less than four miles from Canary Wharf, the ABP offices look over London City Airport, with Brussels, Paris and Amsterdam just an hour away.

A runway is being built for longer haul flights.

The local authority Newham see the new Chinese-owned Docklands development as crucial to the economic generation of the area that has suffered from economic deprivation since the docks closed in the 1980s.

Technology companies from Hong Kong, India, Taiwan and Singapore have all shown an interest in setting up a European base there.

“London is such an international city, not just for China,” said ABP Vice-President John Miu.

The development will complete the first phase in March 2019, at exactly the time when the UK is due to depart from the EU.

Huawei and ABP signed a memorandum two weeks ago to install AI-based wireless infrastructure, described as a “wireless gigabit zone”, in the future smart city.

Miu was unable to comment on that. He said that Brexit had so far had little impact on ABP’s London project. But it could if Brexit happens.

“We need settlement,” he said.

“We don’t need insecurity.”

Additional reporting by Reuters and Agence France-Presse