Taiwanese legislators expressed their worries over the Chinese telecom sector after last week’s release of a US congressional report saying two of China’s largest telecom operators, Huawei and ZTE, posed security threats to America through the use of “backdoor” systems in the equipment being sold.
Hsu Chung-hsin, from the Taiwan Solidarity Union, opposed plans by the national government allowing China to continue investing in the island-nation’s telecom industry. The Taiwanese government is working on the details of opening Type 1 Telecommunications enterprises to Chinese investors.
Hsu cited the recent US intelligence report that Chinese telecom operators were using the equipment they sold to business and government agencies for espionage purposes. The year-long investigation on Huawei and ZTE by the US House of Representatives recommended that both telecom operators be barred from any business activities like mergers, acquisitions, and takeovers in the US Market.
Critiques of the report point out to the timing of its release, as Huawei mulls over an IPO in the States.
According to Hsu, confidential information being held by the Taiwanese government may be compromised in Chinese investment was allowed. He further recommended that the government pass an economic espionage act to protect local businesses from the possible Type 1 investment plans.
Huawei has long penetrated the Taiwanese market. Majority of the island’s 3G wireless network cards are manufactured by the Chinese telecom giant. It has also secured millions of dollars in wireless equipment contracts from Taiwanese telecom operators.
The Chinese government slammed the US Congress after an intelligence committee concluded after a yearlong investigation that telecom giants Huawei and ZTE posed a security threat to US security. The congressional report, which looked into the equipment and networking gears being sold by the telecom companies, warned private companies from making business deals with the Chinese operators.
Authorities in China dismissed the accusations that the Huawei and ZTE were being used by the state government to supply hardware that could be utilized as tools for overseas spying operations. The new heightened tensions between Beijing and Washington comes at an already politically sensitive period between the two nations.
Analysts have noted that the congressional report came at a time when Huawei has been mulling over a probable IPO in the US. Other experts say the report - which included recommendations to block mergers or acquisitions with the two companies - was a business move designed to protect national operators like Cisco.
China’s spokesman for the Commerce Department dismissed the report in a written statement as, “based on subjective speculation and false foundations.” State-run media outlets in China also reported the country’s foreign ministry reacting to the US development. The spokesman for foreign affairs, Hong Lei, commented that the investigation was undoing US-China trade relations.
Security analysts and intelligence officials in the US have been worrying over Huwaei and ZTE’s close relations with the Communist Party in China, as well as its military. The congressional report said that the two telecom companies we’re still under state-influence. The year-long investigation looked into the possibility the hardware being sold had been tampered by the installation of “back doors” which can be used to access information from computers.
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Photo courtesy of Bloomberg
As Telstra makes a bid to strengthen alliances with China’s telecommunications industry, the company has been dealt a blow with the sudden resignation of non-executive director, Timothy Chen, who had just been part of the board for six months.
Mr. Chen, who once served as a regional chief executive for Microsoft, and as president of Mortal in China four years ago, explained his resignation as a decision to focus his executive career in China.
Just six months ago, Mr. Chen joined the board at a time when Telstra was weathering tensions with China, after it banned the Chinese telecom giant Huawei from bidding in Australia’s National Broadband Network project.
Present Telstra chairman Catherine Livingstone commented on Mr. Chen’s shock resignation saying the Beijing-based director had the experience and expertise for Telstra’s plans for Asia.
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As the European telecom market tried to hurdle the effects on the global economic crunch, the telecom operators from the continent, along with many other foreign companies, are eyeing China to expand sources of revenue.
The Asian giant’s economy has been robust despite the financial crisis and foreign telecom companies are seeing the country’s potential.
Although Chinese law does not allow foreign telecom companies to operate wireless networks or provide phone call services, new business opportunities have emerged, especially those focused on network IT services.
BT Group Plc, headquartered in London, has been tapping the Chinese market and benefiting from the country’s economic progress over the years. The British multinational telecommunications company has been targeting multinational companies with a presence in China, or Chinese companies operating inside and outside the country.
AT&T, a US telecom company, has also been enjoying business success by delivering IP-VPN services in China, and has been servicing the increasing presence of Chinese companies abroad.
The outlook against the economic downturns across the globe is brighter in China, as the state government has set out strategic plans in the IT sector, like cloud-computing, and healthcare reforms, which will provide new opportunities for foreign telecom companies.
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China’s Huawei Technologies HWT.UL is in talks with Gulf telcos Etisalat ETEL.AD and Saudi Telecom 7010.SE to manage their fixed-line networks, an executive said, potentially cementing its leadership of a $1 billion regional industry.
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