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US Official Voices Broad Concerns Over China-Based Companies


U.S. Deputy Assistant secretary for Cyber and International Communications and Information Policy Robert Strayer holds a news briefing at the Mobile World Congress in Barcelona, Spain, Feb. 26, 2019.

Lin Feng contributed to this report

WASHINGTON — A senior official in the U.S. Department of State said Wednesday the security concerns the government has raised related to Chinese telecommunications firms Huawei and ZTE extend to all companies headquartered in China, saying they are effectively "under direction" of the Chinese Communist Party.

"It's very important to distinguish how Western democracies operate relative to their private sector companies and vendors, and how the Chinese government operates with its companies," Ambassador Robert L. Strayer, deputy assistant secretary for Cyber and International Communications and Information Policy, said during a conference call with reporters.

Chinese companies don't have the ability to mount a legal challenge to directives from the government, he said.

"They don't have the ability to go to court," he said. "They're basically under direction — what we call extra-judicial command — of the Communist Party of China ... to take actions, when requested by the government. There's not the same rule of law that we consider a part of our daily lives and all of our business dealings in Western democracies."

FILE PHOTO: Logo of Huawei is seen at its showroom in Shenzhen, Guangdong province, China, March 29, 2019.
FILE PHOTO: Logo of Huawei is seen at its showroom in Shenzhen, Guangdong province, China, March 29, 2019.

Strayer has been the point person in the Trump administration's effort to block Chinese firms, and Huawei in particular, from participating in the global rollout of 5G mobile communications technology, insisting that Chinese law requires the companies to cooperate with Beijing's intelligence services.

Strayer and other officials have warned that Chinese telecommunications firms could give Beijing intelligence services secret "back-door" access to sensitive communications networks, or that in a crisis, they could disrupt communications on command.

His comments were among the administration's most comprehensive justification for trying to block Huawei's entry into the U.S. and European 5G markets.

The push has included warnings that the United States may restrict the kind of intelligence it shares, even with close allies, if Washington is not satisfied that communications networks are secure.

To this point, the U.S. has failed to produce hard evidence of Huawei or ZTE engaging in espionage for the Chinese government. However, both firms have been charged with theft of intellectual property from rival companies, and Huawei has been charged with conspiracy to violate U.S. sanctions against Iran.

Huawei and ZTE have consistently denied they ever have or will act as an arm of Chinese intelligence services.

Ren Zhengfei, Huawei's 74-year-old founder and president, recently told the BBC that to do so would be economic suicide.

"Our sales revenues are now hundreds of billions of dollars," he said. "We are not going to risk the disgust of our country and our customers all over the world because of something like that. We will lose all our business. I'm not going to take that risk."

Samm Sacks, cybersecurity policy and China digital economy fellow at the New America Foundation, said, "The reality is the Communist Party of China uses the law selectively as an instrument as it sees fit."

"What does worry me is this hypothetical situation of what Huawei would be employed to do by the Chinese government," she told VOA. "I think we have to look at what Huawei as a commercial company needing to succeed in global markets have in its interest. And I'd say right now, it's not in its interests to use those vulnerabilities. But that could change in another scenario."

The U.S. effort so far has achieved only limited success in its efforts to get allies to impose blanket restrictions on the use of equipment made by Huawei and ZTE in cutting edge, high-speed, next-generation infrastructure. However, Strayer said that as countries around the world begin looking closely at the risks, he believes an eventual ban on the two firms' products is inevitable.

General view of the German headquarters of China's telecommunications giant Huawei Technologies in Duesseldorf, Germany, Feb. 18, 2019.
General view of the German headquarters of China's telecommunications giant Huawei Technologies in Duesseldorf, Germany, Feb. 18, 2019.

He cited a recent analysis of Huawei equipment by government investigators in the United Kingdom, which found myriad security flaws and engineering deficiencies in devices meant to support the rollout of 5G in that country. In Germany, he said, a set of strict security standards under consideration would amount to a de facto ban on Chinese-made 5G equipment.

The proposed German standards would require that telecommunications systems "be sourced from trustworthy suppliers whose compliance with national security regulations and provisions for the secrecy of telecommunications and for data protection is assured."

Given the legal requirement that Chinese companies assist the intelligence services —and keep that assistance secret — "It's hard to see how Chinese technology would meet that standard for protection of data," he said.

Strayer said the U.S. is encouraging all countries to consider similar regulations.

"We have encouraged countries to adopt risk-based security frameworks," Strayer said. "And we think that a rigorous application of those frameworks, if they include supply chain security risk and the consideration of the relationship between a 5G vendor and their government, will lead, inevitably, to the banning of Huawei and ZTE."

In his remarks Wednesday, Strayer focused on the issue of 5G infrastructure, but at times broadened his critique of Chinese government policies to encompass all firms based in China that deal with sensitive technology.

"We think it's very important that countries deploying 5G networks consider the relationship between a foreign government, where a vendor is headquartered, and the companies themselves and that country," he said. "When we look at the Chinese laws, relative to intelligence and national security, those allow the Chinese government to direct the actions of companies for their national interest of China, as well as require that companies to maintain secrecy, about the actions they've taken at the direction of the Chinese Communist Party."

He also echoed a common complaint from Western countries that Chinese government policies provide advantages to domestic firms that give them an unfair competitive advantage when they move into international markets.

"The Chinese government, through state-owned banks and other sources, has provided in some cases zero percent interest, 20-year loan offers, which are not commercially reasonable," he said. "That kind of unfair playing field is not one that Western technology should have to compete with. It should be a level playing field for technology vendors."

In addition, he said, government-supported "cross subsidization" allows Chinese firms another avenue by which they can undercut the prices of Western firms.

"They can get large profits on what they sell into the Chinese market, which they largely have under their control through the government, and then use those subsidies to then offer lower prices in our markets in the West."

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