U.S. Senators Say South Korea Should Not Hire China Firm Huawei

By DAVID E. SANGER

WASHINGTON — Two leading senators have asked the Obama administration to warn South Korea against allowing Huawei, the Chinese telecommunications firm, to build large parts of a next-generation network for the capital city of Seoul, arguing that it could give the Chinese government a way to enter the networks of a major American ally.
The issue appears almost certain to come up when Vice President Joseph R. Biden Jr. arrives in Seoul later this week, the last stop on his Asian trip.
At a moment when the United States is already protesting China’s establishment of an “air defense zone” over disputed territory in the East China Sea, the Huawei issue is bound to be another irritant in an increasingly contentious discussion with the government of the Chinese president, Xi Jinping.
The White House would not say whether Mr. Biden was planning to bring the issue up with the leadership in Seoul.
But a senior administration official, while declining to talk about the diplomatic discussions between Washington and South Korea, noted that “we do have concerns about Huawei, evidenced by the fact that Huawei was excluded in October of 2011 from taking part in the building of America’s wireless emergency network for first responders, due to U.S. government national security concerns.”
In that case, and in others, Huawei has been blocked from playing a major role in the American telecommunications market for fear that it would build a “back door” into its systems that would give the Chinese government entry points into the telecommunications networks and Web traffic.
For years, Huawei has dismissed those arguments, arguing that the company has no significant link to the Chinese government, and that its systems are open for scrutiny by regulatory authorities.
Recently, senior company executives have said they had all but given up on the American market.
The warning about the Seoul network came in a private letter to Secretary of State John Kerry, Secretary of Defense Chuck Hagel, and the director of national intelligence, James R. Clapper Jr.
In the letter, Senator Dianne Feinstein, Democrat of California and the chairwoman of the Senate Select Committee on Intelligence, and Senator Robert Menendez, Democrat of New Jersey, the chairman of the Senate Foreign Affairs Committee, cited the close American and South Korean intelligence and military ties.
They warned that “the integrity of telecommunications infrastructure is critical to the operational effectiveness of this important security alliance” and asked for an “assessment of the potential threats” of having Huawei acting as a supplier to a new, advanced system in Seoul.
The senior administration official, who requested anonymity because it involved a sensitive diplomatic issue, would not say how the White House planned to respond to the letter.

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China’s Move Puts Airspace in Spotlight

By RICK GLADSTONE and MATTHEW L. WALD
 
 China’s proclamation of a new “air defense identification zone,” an obscure aviation term that became the catalyst for escalating military tensions with Japan and the United States this week, has thrown a broader spotlight on the control of international airspace, an issue that has created confusion, and danger, in other places affected by territorial disputes.
Who has the right to fly where has been a historical irritant in relations between China and Vietnam, Panama and Colombia, Japan and Russia, to name a few examples.
Aviation experts say airspace-control arguments are perhaps most acute in Cyprus, the divided Mediterranean island, where rival air traffic controllers on the Greek and Turkish sides do not communicate with each other and can give conflicting flight information to pilots, elevating the risk of collisions.
No international treaties or agreements define the size or the rules of air defense identification zones, known by their initials, A.D.I.Z.
The zones, which originated early in World War II, have been established by more than a dozen countries with maritime borders, most notably the United States and Canada.

The B-52 message

The United States was also responsible for defining the zones claimed by Japan, Taiwan and South Korea, a legacy of the American military role played in the region since the Cold War, and an underlying source of resentment in China that perhaps helps to explain why it has asserted its own zone.
Managed by domestic military and civilian authorities, the zones are much bigger than the internationally recognized boundaries of the countries that proclaim them.
While not legally binding, they require that aircraft intending to enter the zones first provide identification and location information to determine whether they are a threat to national security.
Aircraft that fail to comply may be regarded as hostile, potentially leading to their being forced to land or shot down.
Civilian aviation officials said Wednesday that China’s new zone was just another fact of life international commercial airlines must now take into account in their flight plans and scheduling.
“There have been no delays, disruptions or anything that would impact the traveling public,” said Perry Flint, a spokesman in Washington for the International Air Transport Association, a trade group.
“We continue to monitor the situation closely.”
Others said, however, that China’s new zone was different in some important respects — the most obvious being that it overlaps with Japan’s in an area where both claim sovereignty to the Senkaku islands.
Aircraft traversing that airspace could face a confusing situation.
“The question here is, file the intent with which nation?” Robert Mann, an aviation consultant, said.
“Seems the jury is out about filing to one, the other, or both. It won’t really be an issue until someone’s aircraft is intercepted. Hopefully not.”
The Chinese also imposed requirements that other countries do not, notably that all aircraft — even those that are not flying to a China destination but are simply passing through — provide identification and flight plans.
Secretary of State John Kerry made a point of emphasizing that distinction in his criticism of China’s new zone on Saturday.
“The United States does not apply its A.D.I.Z. procedures to foreign aircraft not intending to enter U.S. national airspace,” he said.
China provided no advance warning of its new zone to the International Civil Aviation Organization, a United Nations specialized agency, based in Montreal, that sets standards and regulations necessary for aviation safety and security.
Anthony Philbin, a spokesman, said in an emailed response to a query that “China was not required to contact I.C.A.O. on this matter and it therefore did not provide us with any notice.”
Some airlines have begun filing plans with China.
Singapore Airlines, which does route flights over the disputed airspace, files its plans with the Japanese authorities but said that since Monday it had “been keeping Chinese authorities informed” of flights through the area, according to a spokesman.
It is rare that commercial airlines become hostages to political disputes, but there are precedents.
In 1983, Korean Air Lines Flight 007 was shot down by a Soviet military jet after flying through a prohibited zone.
All 269 people on board died.

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New Australian government upholds ban on China's Huawei

SYDNEY (Reuters) -- Australia's newly elected conservative government is upholding a ban on China's Huawei Technologies Co Ltd from bidding for work on the country's $38 billion National Broadband Network (NBN), the attorney-general said on Tuesday.

The former Labor government cited cyber-security concerns when it banned Huawei, the world's largest supplier of telecom network equipment by revenue, from bidding for contracts on the infrastructure rollout last year.
Some senior officials in the new Liberal-led Coalition government, including Communications Minister Malcolm Turnbull, had supported a review of the ban, raising expectations it would be scrapped.
But Attorney-General George Brandis said the government had decided not to change the policy, citing new briefings from Australia's national security agencies.
"Since the election the new government has had further briefings from the national security agencies. No decision has been made by the new government to change the existing policy," Brandis said in an email to Reuters.
"The decision of the previous government not to permit Huawei to tender for the NBN was made on advice from the national security agencies. That decision was supported by the then opposition after we received our own briefings from those agencies," he said.
The government would not comment on advice from the national security agencies, he added.
China, a major trading partner in the midst of negotiations on a free-trade agreement with Australia, expressed concern.
"We... consistently oppose using national security concerns as a pretext to interfere with the two countries' normal economic cooperation," Chinese Foreign Ministry spokeswoman Hua Chunying told a daily news briefing in Beijing.
The move could please Australia's traditional ally, the United States, where lawmakers have warned against awarding Huawei major contracts over spying fears.
The U.S. House Intelligence Committee last year described Huawei as a national security threat and urged American firms to stop doing business with the Shenzhen-based company. 

The British government said in July that checks on Huawei's role in British telecommunications infrastructure had been "insufficiently robust" in the past, and announced a review of security at a cyber centre the company runs in southern England.
Huawei spokesman Jeremy Mitchell said the company believed the Australian government was still reviewing its policy.
"Huawei's understanding is that no decision has been made regarding the NBN and that the review is ongoing," Mitchell said in an emailed response after Brandis released his statement.
Huawei has become a significant market force in Australia. 

It supplies equipment to Singapore Telecom's local unit Optus as well as Vodafone, and has conducted trials with Australia's biggest telecom company, Telstra Corp Ltd. 

It also employed former senior Liberal Party officials as part of its lobbying effort to overturn Australia's ban.
The company, founded in 1987 by former People's Liberation Army officer Ren Zhengfei, last year proposed building a cyber security evaluation centre in Australia.

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George Osborne in China – wide-eyed, innocent and deeply ignorant

Prostituting one's security and economic interests to a country whose values, practices and interests are wholly at odds with one's own is not openness but recklessness.
By Will Hutton

'Bambi in Beijing': George Osborne on last week's trade visit to China. 

Britain must be an open trading nation, welcoming inward investment just as it seeks to invest in others. 

But prostituting one's security and economic interests to a country whose values, practices and interests are wholly at odds with one's own is not openness but recklessness. 

Last week, George Osborne was Bambi in Beijing – wide-eyed and innocent to the threats of the Chinese forest in which he was so ignorantly wandering.
Together, the succession of deals – on banks, nuclear energy and hi-tech – represent such one-sided economic concessions and expose our own fundamental weaknesses that they are embarrassing to the point of humiliation. 

In each, Britain surrendered sovereignty and exposed itself to economic risks that were not worth the potential gain, especially for anybody with even an elementary understanding of contemporary China.
They also showed how indefensible so much financial and industrial policy has been over the past 30 years. Britain has surrendered its capabilities in sector after sector in the name of liberalisation and privatisation, a strategic policy that Bambi is continuing with unquestioning enthusiasm. 

I wonder, as he prostrated himself before the Chinese, whether he asked himself why he – and Britain – had ended up kowtowing to such a degree. 

I doubt it.
The most eye-catching deal was on nuclear power, with the agreement that the Chinese nuclear industry will be able to build and own nuclear power stations in Britain. 

Lady Thatcher boasted, when the electricity industry was privatised, that she was giving power back to the people. 

Thirty years later, we learn it's become a gift to the Chinese Communist party, offering its state-owned nuclear power companies price and profit-margin guarantees that privatisation and liberalisation, wholly unrealistically in such a long-term business, were supposed to have left behind for ever.
This is a breathtaking step in an industry where the sensitivities over operating safety, technical efficiency and waste disposal are so acute. 

Fukushima, Three Mile Island and Chernobyl are remembered around the world. 

Chinese state-owned companies are a byword, not least in China, for inefficiency, loss-making and politicisation of decision-making. 

The party has wrestled for a generation with the reality that these companies, designed by Mao to embody the communist dream of uniting economic and social obligations, abolishing worker exploitation and spearheading modernisation, are sclerotic economic duds.
Of course the party should let go, but it does not operate the kind of market economy that Bambi thought he was admiring. 

This is a system of Leninist corporatism. 

The party sustains its monopoly of power by control of the economy; it owns what it considers strategically important and allows private companies to operate only because they submit to a board of communist officials.
There are thus no sources of independent economic and political power. 

Crucially, the role of the state-owned enterprises is to offer employment, so heading off another potential challenge to party authority from social unrest. 

The job of the state-owned banks is to provide unconditional credit to the loss-making state-owned enterprises so they can avoid cumulative lay-offs that would otherwise run into tens of millions. Unsurprisingly, this politicised system is opaque and corrupt.
The state-owned nuclear power companies are at its heart. 

Last week, Transparency International declared that China's companies were the least transparent of any it surveyed. 

The Chinese nuclear industry is a black box unpenetrated by independent Chinese scrutiny, let alone foreigners. 

But you can be certain that the regulatory processes and decision-making will be as politicised as everything else. 

This is China's strategic and military heartland, central to one-party control.
British energy policy, post-privatisation, is a mess. 

Centrica, which owns British Gas, was EDF's partner in building nuclear power stations. 

It dropped out claiming that the probable financial returns were not high enough and too uncertain, preferring to spend £500m buying back its own shares to support their price and thus the bonuses of its directors, the kind of capitalism Bambi refuses to reform.
British ownership structures and director remuneration should be reconstructed and reconstituted and Centrica offered a long-term energy policy framework in which to invest. 

But that would be the sort of interventionist "socialism" that Ed Miliband favours. 

So, instead, we ask the Chinese Communist party to build nuclear power stations for us. 

Nor will they be as diligent as EDF has been in ensuring as much work as possible is sourced in Britain: the open ambition is to win work for China. 

Only Bambi could end up in such a position.
Compounding the error, he has decided to allow Chinese banks to trade in London through branches. Iceland's bankrupted banks operated in Britain through branches. 

Never again, we said.

If a bank wants to function here, it must put its own capital behind its British operations. 

But desperate to win the City's right to trade in renminbi, Bambi wants to waive this obligation uniquely for Chinese banks. 

China's banking system is precarious; non-performing loans could be as high as $5trn, proportionally far in excess of pre-crisis Iceland. 

At least the British taxpayer will be able to underwrite their British operations when the system crashes, as it almost certainly will.
Every executive from a hi-tech company visiting China is advised to travel with a new laptop, so extensive are the cyber attacks. 

But Bambi, oblivious to this reality, was busy promoting hi-tech collaboration, including with the space industry.
Here, Britain's position is once again crass. 

Eurosceptic Bambi and his party refuse deeper collaboration with the EU on space, recoil before the overt mercantilism of the Americans and so think China offers a blank cheque book. 

Chinese hackers need no longer hack the nuclear, space and other industries for insights and codes they can use for military and commercial advantage. 

Bambi is offering them all on a plate.
A Chinese schoolgirl told him and Thumper, aka Boris Johnson, that China would be concerned if so much of their country was being sold to foreigners. 

Thumper laughed it off. 

But with the People's Daily writing that progress had only been possible because of David Cameron's admission that he had mishandled Tibet (where, since 2009, 100 monks and nuns have set fire to themselves in protest against Chinese rule), Britain's abasement was complete. 

Economically misgoverned for a generation, we are reduced to being principle-free economic mendicants, with Bambi Osborne and Thumper Johnson touring the world for hand-outs. 

I don't know about you, but I am ashamed.

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