China appears to be stepping up its defense of Huawei this week, following a decision that was reached back in April that would severely limit the company's participation in building out the UK's 5G networks. The country has yet to directly threaten a response to the move but newly reported statements made by the country's ambassador to London, Liu Xiaoming, suggesting that the country is prepared to rethink both trade and investment relationships.
Speaking with the BBC, the ambassador indicated that that deals between the UK and Chinese businesses, specifically, would deteriorate if Huawei is blocked.
In effect, any move to block Huawei would undoubtedly increase the already tenuous relationship between the Western and Eastern powers. But it would also result in 'bad effects' from Chinese companies that operate in or trade with the UK. Those would impact both trade and investment, the ambassador says.
Delayed but not at all taken off of the table
The almost passive remarks follow a decision by the UK's National Security Council to revoke Huawei's access to 'core' segments of the incoming next-gen networks after a meeting was held between the agency and Huawei. The decision has not been finalized yet because of another decision by the chair of the organization, Prime Minister Theresa May, to step down, delaying the process. So it may take until as late as July before the move is completed if at all.
The move follows a months-long barrage of warnings about potential security risks posed by the use of Huawei equipment in key networks where information might be siphoned off for use by the Chinese government. Those have primarily been led by the US government but not entirely.
While the Huawei Cyber Security Evaluation Centre (HCSEC) Oversight Board did unsurprisingly clear the company's hardware for use in the UK, it did not clear its software development practices. The Huawei-backed group disclosed as much when it released a related report back in March, spurring further concerns.
In the interim and following what equates to a soft ban from the US, Huawei has also lost the support of a major player in the mobile market that heralds from the UK — namely, ARM. That company is responsible for effectively every chipset in any modern mobile device.
China isn't without leverage
Despite the massive impact the ban and subsequently broken partnerships have had on Huawei, the company and China aren't without leverage in dealings with the UK and other countries either. Global rating firm S&P recently reported that the ban may actually be impacting US technology companies negatively than it is China.
Huawei is the world's second-largest mobile manufacturer and world leader in networking equipment. So cutting off the company has the knock-on effect of cutting drastically into the overall business that any partner expects to conduct. By some estimates, the ban is expected to reduce revenue streams by as much as or more than 15-percent.
That gives Chinese authorities a clear example to point to when arguing against bans against the company from the perspective of how those will be detrimental to businesses on both sides of the divide.