U.K., Allies Plan Huawei Alternatives as China Tensions Grow

(Bloomberg) -- The U.K. is in talks with the U.S. and other allies about developing mobile network systems to reduce their reliance on Huawei Technologies Co. as tensions with China intensify.

The plan is likely to sour the atmosphere between Britain and China even further, with relations already under strain over coronavirus and Beijing’s proposed new security law for Hong Kong.

But Prime Minister Boris Johnson’s government is determined to become more self-sufficient in technology, and less dependent on China, which has been a key and growing trading partner for the U.K.

Speaking on Friday, James Slack, Johnson’s spokesman, confirmed Britain wants to reduce reliance on Huawei in fifth generation mobile networks. And he reinforced London’s condemnation of Beijing’s decision to impose sweeping new national security legislation in Hong Kong.

The U.K. has a significant trade deficit with China. In 2018, U.K. exports to China were worth 22.6 billion pounds ($25.1 billion), compared to imports of 44.7 billion pounds.

The risk of Britain’s more critical approach to China is it will alienate a key trade partner and undermine a crucial source of investment and vital goods at a time when the U.K. is already facing its worst recession for 300 years.

The prime minister announced in January that he would allow Huawei to take a limited role in the U.K.’s fifth generation mobile networks. But that decision provoked a furious response from U.S. President Donald Trump, who had urged allies to block the company, and caused dismay among some colleagues in Johnson’s own Conservative Party.

In the months since, China’s much-criticized handling of the coronavirus outbreak has added to concerns in London, where officials say a reset of relations is required.

At the same time Johnson is seeking to rebuild bridges with the U.S., Britain’s second biggest trading partner, as the U.K. exits the European Union’s single market and customs union. Talks are under way on a future transatlantic trade deal.

The prime minister and Trump talked about both “the positive discussions between the U.K. and U.S. on a comprehensive free trade agreement, and telecommunications security,” during a call on Friday, Johnson’s office said in an email.

Speaking to reporters earlier on Friday, Slack said the government has always wanted to reduce reliance on Huawei for mobile network technology. The company is deemed a high risk vendor in the U.K., but London rejects U.S. assessments it poses a security threat because its equipment could be used by Chinese spies.

“We set out in January that we were seeking new entrants into the market in order to diversify,” Slack said. “That is something we have been speaking with our allies about, including the United States.”

The U.K.’s National Cyber Security Centre is studying the implications of the recent U.S. announcement of new sanctions against Huawei.

Earlier, The Times of London newspaper reported that Britain is aiming to forge an alliance of 10 democracies to develop alternatives to Chinese technology. The group would be the G-7 nations plus Australia, India and South Korea, the paper said.

In a separate challenge to China, Johnson’s administration underlined its condemnation of the proposed new national security law for Hong Kong, which democracy advocates fear will curtail the freedoms of the population in the former British colony. The issue was also raised on Friday’s call with Trump.

“The leaders said that China’s plan to impose national security legislation on Hong Kong goes against their obligations under the Sino-British Joint Declaration and would undermine Hong Kong’s autonomy and the One Country Two Systems framework,” Johnson’s office said in its statement about the call.

U.K. Foreign Secretary Dominic Raab warned on Thursday that the government will open a path to citizenship for 350,000 Hong Kong residents unless China backs down on its planned security laws.

On Friday, China strongly opposed the British plan. Slack said in response that the government hopes Beijing will back down and has raised the issue repeatedly with Chinese officials. “We hope they will listen carefully to the arguments we have made in public and in private,” Slack said.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.