Caixin
Dec 07, 2018 08:42 PM
BUSINESS & TECH

Japan to Ban Huawei, ZTE From Government Networks: Report

An advertisement for Huawei Technologies Co. Ltd. is seen outside an electronics store in Tokyo on Aug. 6. Photo: VCG
An advertisement for Huawei Technologies Co. Ltd. is seen outside an electronics store in Tokyo on Aug. 6. Photo: VCG

Japan is preparing to ban use of telecom equipment from Chinese suppliers Huawei Technologies Co. Ltd. and ZTE Corp. in government-backed networks, according to a published report, as the nation joins a growing list of countries and companies that have shunned the pair over security concerns.

Tokyo will make changes next week to its government procurement policy that bring the new policy into effect, local media Yomiuri reported in its online edition (link in Japanese), citing an unnamed source close to the government. The source said the new policy will not explicitly ban equipment from the pair of companies, but will have that effect.

The ban follows similar action by the U.S. in August, when Congress passed a bill that largely forbade the use of equipment and components from Huawei, ZTE and other Chinese companies in government-backed projects. Tokyo’s move also comes as a growing list of other countries, including Australia and New Zealand, implement formal or informal bans on Huawei and rival ZTE, two of the world’s biggest suppliers of equipment used to build big wired and wireless networks.

One of the latest examples of such action came earlier this week when leading British carrier BT Group PLC said it was taking out Huawei equipment from the core of a recently acquired network. The carrier also confirmed it had a longstanding policy of not using such equipment in any of its own core networks.

Governments and individual companies worry about potential connections between the Chinese manufacturers and Beijing, partly due to the close relationships between government and businesses in China due to the country’s socialist past, when everything was state-owned. Suspicions over Huawei are also based on the background of founder Ren Zhengfei as a former army engineer, even though the company has repeatedly denied any relationships with Beijing.

The setback in Japan comes the same week Huawei’s chief financial officer was arrested while transiting through Canada on a request for extradition to the U.S. Few details were available on the U.S. request, but local media said the case was related to alleged violations of previous sanctions banning the sale of American products to Iran.

The controversies surrounding Huawei also come as Washington and Beijing engage in a trade war, which saw a temporary truce a week ago as the two sides agreed to sit down to try to reach a new comprehensive agreement. Washington complains that China engages in unfair trade practices such as unfairly subsidizing local companies and stealing intellectual property.

Responding to the BT case, Huawei underscored to Caixin its longstanding relationship with the British company going back 15 years and more broadly cautioned against the politicization of network security. It provided similar sentiment in an open letter to its suppliers after word of Meng’s arrest, saying that any related developments will not affect relations with the many companies in its supply chain.

That list includes many U.S.-based companies that could be banned from selling products to Huawei if it is determined to have violated earlier anti-Iran sanctions. Shares of many of those companies fell in Thursday trading in New York after news of Meng’s arrest became public. ZTE was forced to halt production for several months after being subjected to such punishment earlier this year in a similar case.

Contact reporter Yang Ge (geyang@caixin.com)

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