China slams US blacklisting of Huawei as trade tensions rise

China on Thursday slammed a decision by the US government to put telecom equipment giant Huawei on a blacklist and said it will take steps to protect its companies, in a further test of ties as the economic heavyweights clash over trade.

In what some have compared to the Cold War arms race, the United States is worried that 5G dominance would give any global competitor such as China an advantage Washington is not ready to accept. 

Huawei is far ahead of competitors in developing 5G technology, and denies accusations by the US and others that it facilitates Chinese spying. 

A foreign ministry spokesman, Lu Kang, criticised "abuse of export control measures" as President Donald Trump signed an order requiring US vendors to get approval for sales to Huawei.

China is strongly against other countries imposing unilateral sanctions on Chinese entities, a commerce ministry spokesman said, stressing that the United States should avoid further damaging Sino-US trade relations.

"China has emphasised many times that the concept of national security should not be abused and that it should not be used as a tool for trade protectionism," Gao Feng, a spokesman at the ministry, told reporters.

"China will take all the necessary measures to resolutely safeguard the legitimate rights of Chinese firms."

What US and China are negotiating

"The tariff hike by the United States will only bring greater difficulties to the consultations," Gao said.

"We urge the United States to cancel the wrong practices as early as possible, avoiding greater losses to Chinese and American companies and consumers, and causing a 'recession-like' impact on the world economy."

Three differences remain between the two countries, according to China.

China believes tariffs were the genesis of the trade dispute, and that all tariffs must be eliminated in order to reach a deal.

The second issue centres on the additional volume of US goods that China will agree to buy, Vice Premier Liu He, China's lead trade negotiator, said last week without giving details.

The third is over how balanced the text of the draft agreement of the trade deal should be, he said.

"To reach any agreement, China's three core concerns must be properly resolved," Gao said. 

Germany, France respond

Germany will stick to its position that companies like Huawei bidding in the country's 5G auction must meet criteria set by the government, Chancellor Angela Merkel said on Thursday.

Germany in March set tough rules for vendors supplying telecoms network equipment, but stopped short of singling out China's Huawei Technologies for special treatment due to concerns over its ties to the Chinese government.

French President Emmanuel Macron said it was not the aim of France to block Huawei, nor to launch any form of technological war.

"Our perspective is not to block Huawei or any company, it is to preserve our national security and European sovereignty. But I think launching now a technological war or a trade war ... is not appropriate," said Macron on Thursday, speaking at the Paris 'VivaTech' event.

However, experts from England and the Netherlands expressed concerns.

Dutch newspaper De Volkskrant cited intelligence sources as saying Huawei has a hidden "backdoor" on the network of a major Netherlands telecoms firm, making it possible to access customer data.

The newspaper said Dutch intelligence agency AIVD was looking into whether the situation had enabled spying by the Chinese government. 

British ministers have discussed allowing Huawei a restricted role in building parts of its 5G network. The final decision has not yet been published.

"I very much hope there is time for the UK government, and the probability as I write of a new prime minister, to reconsider the Huawei decision," said Richard Dearlove, who was chief of UK's Secret Intelligence Service from 1996 to 2004.

"The ability to control communications and the data that flows through its channels will be the route to exercise power over societies and other nations," Dearlove wrote in the foreword to a report on Huawei by the Henry Jackson Society.

Trump limits foreign telecom tech

Trump on Wednesday signed an executive order declaring a national emergency and barring US companies from using telecommunications equipment made by firms posing a national security risk, paving the way for a ban on doing business with Huawei.

The executive order invokes the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the United States.

The order directs the Commerce Department, working with other government agencies, to draw up a plan for enforcement within 150 days.

The order, which has been under review for more than a year, is aimed at protecting the supply chain from "foreign adversaries to the nation's information and communications technology and services supply chain," said Commerce Secretary Wilbur Ross.

"Under President Trump's leadership, Americans will be able to trust that our data and infrastructure are secure," he said.

Huawei a 'threat'?

The order does not specifically name any country or company, but US officials have previously labelled Huawei a "threat" and actively lobbied allies to not using Huawei network equipment in next-generation 5G networks.

The executive order comes at a delicate time in relations between China and the United States as the world's two largest economies ratchet up tariffs in a battle over what US officials call China's unfair trade practices.

The United States has been actively pushing other countries not to use Huawei's equipment in next-generation 5G networks that it calls "untrustworthy." 

In August, Trump signed a bill that barred the US government itself from using equipment from Huawei and another Chinese provider, ZTE Corp.

Federal Communications Commission (FCC) Chairman Ajit Pai, who has called Huawei a threat to US security, said on Wednesday that "given the threats presented by certain foreign companies’ equipment and services, this is a significant step toward securing America's networks."

The order directs the director of US National Intelligence to produce an assessment by late June on the risks to the United States and critical infrastructure "from information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary."

'Unreasonable restrictions'

Huawei on Thursday said "unreasonable restrictions" by the US infringe on its rights.

"Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives," the telecom giant said in a statement.

"In addition, unreasonable restrictions will infringe upon Huawei's rights and raise other serious legal issues," the statement said.

China telecoms targeted 

In January, US prosecutors charged two Huawei units in Washington state, saying they conspired to steal T-Mobile US Inc trade secrets, and also charged Huawei and its chief financial officer with bank and wire fraud on allegations that the company violated sanctions against Iran.

The FCC in April 2018 voted to advance a proposal to bar the use of a $9 billion government fund to purchase equipment or services from companies that pose a security threat to US communications networks.

The FCC voted unanimously to deny China Mobile Ltd’s bid to provide US telecommunications services last week and said it was reviewing similar prior approvals held by China Unicom and China Telecom Corp.

The issue has taken on new urgency as US wireless carriers rollout 5G networks.

While the big wireless companies have already cut ties with Huawei, small rural carriers continue to rely on both Huawei and ZTE switches and other equipment because they tend to be cheaper.