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Huawei and the NBN: beware the long arm of the CCP

In response to the Australian government’s decision to prevent Huawei from tendering for National Broadband Network projects, Huawei Australia went on the offensive. Former foreign minister and current…

Huawei has trumpeted its private-sector credentials, but it is a critical supplier of technology to the People’s Liberation Army and has strong links to the CCP. AAP

In response to the Australian government’s decision to prevent Huawei from tendering for National Broadband Network projects, Huawei Australia went on the offensive. Former foreign minister and current board member Alexander Downer criticised the decision as absurd. Dismissing suspicions of Huawei’s links to the Chinese Communist Party (CCP) and People’s Liberation Army (PLA), the company’s local spokesman Jeremy Mitchell told the ABC Radio that the decision demonstrated “a lack of understanding of modern China”.

In fact, Huawei Australia’s local company men appear to have little idea of how China’s political economy, the Chinese telecommunications sector, or the Shenzhen-based parent company operates. Their strong response to the ban bring to mind the observation by the American author, Upton Sinclair jnr, that “it is difficult to get a man to understand something if his salary depends upon his not understanding it”. Fortunately, intelligence organisation ASIO and the Gillard government are not subject to the same constraints.

The technical aspects of how any cyber attack or data theft might take place, and whether it is possible to guard against it, is not the concern of this article. Even if it was possible to do so, Huawei Australia would still have access to the architectural blueprints of the NBN’s infrastructure, which brings up other issues of national security.

It is revealing that Beijing does not allow outside companies to have sophisticated architectural knowledge of its own networks. Huawei Australia is a subsidiary of the Chinese parent and is ultimately answerable to its Shenzhen base. This means that the key question is whether we can trust the claims that the parent company is completely independent from the Chinese regime.

This is where an accurate understanding of the contemporary Chinese political economy is important.

The first thing to note is that Huawei operates in what Beijing explicitly refers to as one of seven “strategic sectors”. Strategic sectors are those considered as core to the national and security interests of the state. In these sectors, the CCP ensures that “national champions” dominate through a combination of market protectionism, cheap loans, tax and subsidy programs, and diplomatic support in the case of offshore markets. Indeed, it is not possible to thrive in one of Chinese strategic sectors without regime largesse and approval.

Every large company operating in these strategic sectors are required to receive and implement political directives from the relevant ministries (in the case of telecommunications, the two most prominent would be the ministries of state security and commerce.) It is almost always the case that at least two of the three most senior positions within a “national champion” is also a CCP member. Although nominally a private company, Huawei is openly referred to as a “national champion” in official policy documents and speeches by senior officials and continues to receive many of the advantages. It would be unthinkable that Huawei would not be subject to the same expectations and constraints as other national champions.

Second, Huawei is a large and critical supplier of technologies and materials to the PLA. The PLA does not source such sensitive and important assets from companies that are truly independent from the regime. The fact that the CCP and PLA trust Huawei not to leak sensitive information and technologies to outside entities is strong indication that it considers Huawei “one of its own”.

Third, the need to simultaneously pursue political directives and commercial goals does not lend itself to high standards of corporate transparency since the mixing of business and politics does not generally occur in the light of day. Tellingly, Huawei Australia’s board and executive members do not even know, or else cannot reveal, the full list of the parent company’s executive union and extensive information on their backgrounds.

This brings us back to the issue of Chinese investment activity in Australia. There has been around $70 billion worth of Chinese investment in the Australian economy since 2009. This is hardly evidence of financial xenophobia.

But when it comes to sensitive industries or deals, we have caught on to the fact that the CCP is the dominant player in the modern Chinese political economy. The regime is the ‘invisible hand’ that drives the economy. Every important sector – telecommunications, information technology, media, banking, finance, energy, shipping, construction and so forth – is characterised by extensive CCP involvement. Although far from a homogeneous entity, the 80-85 million CCP members own and control key sectors of the Chinese economy.

This, and not the carefully-crafted fantasy of a vibrant and independent private-sector driven economy, is the reality of modern China.

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11 Comments sorted by

  1. Michael Woodhead

    Editor

    If I were a Falun Gong or Dalai Lama supporter can't say I would be happy discussing anything on a Huawei network in Australia. In China, voice recognition and word recognition software are routinely used to screen and 'harmonise' phone and online communications. And given the PRC's lack of transparency and accountability on cyber-related matters such as the Great Firewall/hacking, the PRC-based Huawei does not deserve the benefit of the doubt.

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  2. Frank Moore

    Consultant

    Great article John.

    Note however, that Conroy has flagged the eventual sale of this taxpayer funded wholesale monopoly, to the PRC.

    When asked on NewsRadio prior to last election that the most likely fate for the NBN was to be sold to the CHINA he answered indignantly: "WHY NOT!".

    No one knows where or when the idea of Conroy's brainwave came to past.

    In circumstances such as these, I look to international players, what they are doing overseas, and the presence on the ground of the…

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  3. Margo Saunders

    Public Health Policy Researcher

    For what it's worth, this company has just been named as the sponsor of the Canberra Raiders.

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  4. Hal Ninethou

    logged in via Facebook

    I suspect Downer, Brumby et al must be genetically related to Sir Neville the great appeaser.

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  5. Comment removed by moderator.

    1. James Jenkin

      EFL Teacher Trainer

      In reply to Gideon Polya

      Hi Gideon, that's quite fascinating - could you show us evidence that Australian media are prevented from publishing information about Israel by this D notice system?

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  6. Andrew Lumsden

    Partner Corrs Chambers Westgarth

    Gideon
    A great topic for conversation and a good piece but I'm afraid it’s a bit one dimensional. As Tony Boyd mentioned on the weekend “Chinese companies lawyer-up” spying is a wider topic than what the Chinese do or don't do.
    How did the UK and Singapore governments get comfortable with Huawei? Surely we can elevate the debate beyond "tit for tat."
    I have to say my concern is not that Australia made a rational and sensible decision but that we are simply adopting an American position on this issue. We can and should do better.

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  7. Comment removed by moderator.

  8. David Elson

    logged in via Facebook

    Is there any hard evidence that Hua Wei is a security risk? Aside from being owned by the Chinese and providing networks to their PLA?

    This is like saying Telstra presents a security risk to China because it services our military (phone lines etc..)

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  9. Peter Redshaw

    Retired

    When you are dealing with electronics and communication networks providing access by any other government owned corporation to the construction of that network let alone China would be very questionable. I am not the first to suggest that their is a problem with Chinese communication espionage, both government and corporate. There are many questions of the way in which China has acquired other countries or corporations technologies. Although I say that knowing that China is not the only government…

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