The US government is contacting key allies to get them to persuade telecommunications companies in their countries to avoid using equipment from China’s Huawei Technologies, The Wall Street Journal reported.
Officials from the US have reached out to counterparts and executives in countries including Germany, Italy and Japan about perceived cybersecurity risks, the Journal said, citing unidentified people familiar with the matter. The US may boost aid for telecoms development in countries that shun Huawei equipment, some of the people said.
Huawei has long been labelled a security risk by US lawmakers because of alleged links to the Chinese government, in part because it was founded by former military engineer Ren Zhengfei. While the Shenzhen-based company has denied any inappropriate connections, it’s been banned in Australia from supplying 5G wireless equipment, faced scrutiny in the UK and found itself largely shut out from the US market.
Scrutiny of Huawei has increased since Donald Trump became US president as trade tensions between Washington and Beijing escalate. The closely held company is now the world’s second largest maker of smartphones and is one of the biggest producers of equipment for running phone networks.
Huawei didn’t immediately respond to an e-mailed request for comment.
The spread on Huawei’s 3.25% dollar bonds due in 2022 widened, with investors demanding the biggest yield premium since early July, according to data compiled by Bloomberg. Analysts cited the story as adding to weak sentiment in Chinese and Hong Kong equity markets, which led regional losses.
American officials are concerned about the use of the Chinese equipment in countries that host US military bases such as Germany, Japan and Italy, the Journal reported. There is concern about China’s ability to force companies to comply with government requests, it said.
A number of major telecoms companies directed more than 5% of their capital expenditure to Huawei, according to Bloomberg supply chain data. That includes Telecom Italia and Japan’s NTT Docomo and KDDI, the data shows.
Huawei has been pouring billions into developing 5G technology and its potential to become the global leader in the space is said to be a reason why Trump blocked the biggest ever chip deal earlier this year. — Reported with assistance from Michael Chiang and Carrie Hong, (c) 2018 Bloomberg LP