A second Chinese telecommunications company could be subjected to an Australian government blacklist after the United Kingdom and United States slapped restrictions on ZTE on national security grounds.
With the Turnbull government already under pressure to ban Huawei from participating in the roll out of the 5G network, security agencies are also examining the decisions around ZTE, which is China’s second biggest telco equipment manufacturer.
While their announcements were not coordinated, both Britain and the US have raised fresh concerns about allowing Chinese companies to supply key infrastructure. The news prompted the company to call a trading halt on its shares in Hong Kong and Shenzen.
Britain’s National Cyber Security Centre has told UK telecommunications companies not to use ZTE equipment because its assessment is the “national security risks… cannot be mitigated”.
The Financial Times reported that officials told telcos that Huawei already supplied a lot of equipment for networks and allowing ZTE in would “render our existing mitigations ineffective”.
The US meanwhile has banned American manufacturers from supplying to ZTE for seven years as punishment for violating agreements reached with the US Department of Commerce after ZTE illegally sold phones and equipment to Iran and North Korea.
After admitting to busting the sanctions in 2017 and being fined a record $US1.2 billion, ZTE agreed to take action against employees but failed to do so. The US ban could affect the company’s ability to build smartphones and other equipment because its relies on American processors and Google’s apps.
In Australia, ZTE is geared around consumers, supplying mobile phones and portable wi-fi devices to Telstra, Optus and Virgin that they then sell to customers under their own brands. But it also produces equipment for mobile and wireless networks.
With both the US and UK members with Australia in the Five Eyes intelligence sharing partnership, decisions by them carry significant weight in Canberra. A senior government source indicated security was a key aspect of the current considerations around construction of the 5G network.
The Home Affairs Department confirmed it was aware of the advice issued by the UK.
“The design and working of each nation’s telecommunications infrastructure is unique,” the department said in a statement.
“The Australian Government is committed to ensuring Australian telecommunications networks are secure and resilient.
“The Australian Government always considers the advice of its intelligence and security agencies, and monitors the actions of our international partners.”
While Huawei has tried assuage concerns over its independence by insisting the Chinese government does not own a stake in the company, the Australian Strategic Policy Institute’s Fergus Hanson said ZTE’s biggest shareholder is a state-owned enterprise.
“Agencies would be just as concerned, if not more so, with ZTE than Huawei,” he said.
Mr Hanson, who heads the International Cyber Policy Centre, said Australia and other like minded countries such as the US, UK, Germany and Japan would need to band together to produce their own communications equipment if they banned Chinese companies and wanted to establish a viable alternative market.
Emails sent to an Australian representative for ZTE were not returned.
The government has new powers to decide the involvement of companies in providing telecommunications services on national security. The upcoming decision on the 5G mobile network is crucial because of the likelihood it will be the backbone for much greater automation, such as driverless cars.
Huawei has insisted national security suspicions about it are baseless, while advocates say it can help keep costs down by providing cheaper-priced equipment.
The company was banned by the former Labor government from supplying equipment to the National Broadband Network in 2012, while the Trump Administration personally warned Malcolm Turnbull earlier this year during a visit to Washington about the risks of Chinese involvement in telecommunications.
However, the British and Canadian governments have been more accommodating of Huawei.