[LINK] SMH: 'Why ASIO won't get online with Huawei'

[Roger Clarke]

[A business, non-tech perspective on Huawei]

Why ASIO won't get online with Huawei
April 10, 2012
OPINION
Peter Hartcher
The Sydney Morning Herald, etc.
http://www.brisbanetimes.com.au/opinion/politics/why-asio-wont-get-online-with-huawei-20120409-1wl2y.html

It seems a simple question. What is in the private sector in China 
and what is in the state sector? In fact, it is one of the trickiest 
and most pressing policy matters facing governments and companies 
around the world.

Chinese state-owned companies are an extension of the Chinese 
Communist Party. They have deeper motives beyond simple money-making. 
So they come in for much more circumspect treatment when they try to 
invest in other countries. But private Chinese firms generally are 
welcomed much more openly.

But now the Australian government's controversial decision to ban a 
Chinese communications firm from the National Broadband Network opens 
a sudden new doubt about how to tell the difference.

The Australian ruling on the giant Huawei, on the advice of ASIO, is 
important because it is a guide for a world still puzzling over how 
to treat the onrush of Chinese foreign investment.

The Gillard government's decision "is troubling for China because 
Huawei is a genuine private company and one of the best international 
enterprises that the country has," says the Washington-based 
Australian journalist Richard McGregor, the author of The Party, a 
recent book on China's ruling political party. "They have won 
contracts all around the world. The fact that they - and not a 
State-owned enterprise - were blackballed by Australia should be of 
major concern in Beijing."

Indeed, Huawei is usually described as China's biggest private-sector 
company, with operations in 140 countries, annual revenues of $US32 
billion, and 110,000 employees. In the telecommunications equipment 
industry, only Sweden's Ericsson is bigger.

Its annual average compound growth rate since inception in 1987 has 
been 33 per cent. But the world has been divided in deciding just how 
"private" Huawei really is. Huawei has been permitted to invest in 
seven of the nine national broadband networks being built in the 
world, including in Britain and Singapore. Yet governments in India 
and the US, suspicious of its links with the Chinese military and 
intelligence agencies, have limited its expansion.

Australia has a history of judging generously China's evolution into 
a capitalist country.

Australia was the first developed country in the world, after New 
Zealand, to decide that China's was no longer a socialist economy. By 
agreeing formally to recognise it as a "market economy" under the 
rules of the World Trading Organisation, Canberra improved the 
treatment of Chinese exports and boosted Beijing's global campaign 
for better treatment in markets around the world. Another 79 
countries followed, though the US and EU are still arguing with 
Beijing over whether it is really a market economy or a 
state-controlled one.

Like China itself, Huawei throws up hard questions. "Huawei is a 
microcosm of China's private sector - we know that it is there but we 
do not know its actual size and its boundaries," writes Yasheng 
Huang, of the Massachusetts Institute of Technology, in his 2008 
book, Capitalism with Chinese Characteristics.

He points out that Huawei claims to be owned by its employees, yet a 
2002 lawsuit revealed that it had never issued any share certificates 
to them.

He says that it is deliberately opaque. This "dovetails with the 
widely held knowledge that Huawei has backing from the Chinese 
military. It is inconceivable that a politically naive private 
entrepreneur could have gone as far as this firm has."

The company has certainly had strong support from the state. For 
instance, McGregor recounts the story of the time in 1996 when 
China's then vice-premier, Zhu Rongji, visited Huawei with the heads 
of China's four big state banks in tow.

When the company told Zhu that it needed funds to better compete with 
foreign firms, "Zhu ordered the banks on the spot to support the 
company".

But state banks lend to firms in many countries. That does not make 
them security risks.

ASIO does not publish its advice to governments and the government 
isn't talking about it. So what is the case against Huawei? Part of 
the answer was delivered at the weekend by a well-known US technology 
guru, Mark Anderson of the Strategic News Service.

Anderson chanced to be in Australia when the Huawei ban emerged and 
had high-level meetings with Australian officials and firms. He has 
also been studying Huawei for several years and has released the 
first part of a detailed report on the company.

He points out the first difficulty for any analyst - Huawei's 
reluctance to publish information or speak to the world. Its founder 
and chief executive, Ren Zhengfei, "appears never to have given a 
press interview to any international publication. Can you imagine a 
'normal' company whose CEO has never met with the global press?"

Anderson says the suspicions of Huawei might begin with Ren, who was 
director of a technology research institute for the People's 
Liberation Army, with special expertise in crafting liaisons between 
business and the military, before he left to start the firm. Huawei 
insists that Ren has long ago severed all ties.

But the suspicions don't end there, says Anderson. The company's 
long-serving hands-on chairwoman and potential successor to Ren, Sun 
Yafang, "has been working for, and may retain direct ties with, the 
Ministry of State Security of the Government of China." That's 
China's equivalent to ASIO.

Anderson also draws attention to a report on cyber espionage by the
US-China Economic and Security Review Commission, a creation of the 
US Congress, that finds "recent infusions of cash" from the People's 
Liberation Army to Huawei.

And above and beyond these specifics, how does the world judge 
companies in a country where even major "private-sector" firms, 
including Huawei, have a Communist Party group installed among its 
senior management?

One of the reasons for the longevity of China's dictatorship is the 
thoroughness of the way in which the ruling party has intertwined 
itself with the institutions of the state and even of its private 
sector. It may be an asset for the Communist Party, but it's also a 
liability for China.

Peter Hartcher is the international editor.


-- 
Roger Clarke                                 http://www.rogerclarke.com/
			            
Xamax Consultancy Pty Ltd      78 Sidaway St, Chapman ACT 2611 AUSTRALIA
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Visiting Professor in the Faculty of Law               University of NSW
Visiting Professor in Computer Science    Australian National University