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Trade war

Japanese suitors look past US crackdown on ZTE and Huawei

Tokyo lacks tech counterpart to Chinese telecom equipment powers

U.S. companies have been prohibited from purchasing equipment from Chinese telecom ZTE for seven years.   © Reuters

GUANGZHOU -- Japanese companies continue admiring the technology advances of Chinese telecom equipment leaders ZTE and Huawei Technologies, examining potential tie-ups despite the security risks suggested by American probes into the two businesses.

Washington's seven-year ban issued last month preventing American companies from selling components to ZTE rocked Shenzhen, the Guangdong Province city known as China's Silicon Valley and home to both of the telecom powerhouses as well as many startups.

The ban came in response to the smartphone maker violating a $1.19 billion settlement with the U.S. government last year over illegal exports of technology to Iran and North Korea. Huawei has faced investigations into whether it made such illegal shipments to Iran as well.

Furthermore, American lawmakers have asserted since around 2012 that communications equipment from ZTE and Huawei is used to spy in the U.S. for Beijing. A similar risk has been cited in the U.K.

Information is power, and Beijing has used big data to intensify surveillance of its 1.4 billion citizens as well as Chinese companies since last year. Yet such a large amount of data would be meaningless without technologies for uploading or transferring. Huawei and ZTE supply such technologies, serving as the Chinese equivalent of Cisco Systems in the U.S.

Japan lacks a counterpart that can compete with these American and Chinese titans. Japanese companies praise Shenzhen for its status as a hub of tech companies. Over the past year, employees from major banks and trading houses as well as lawmakers have made a pilgrimage to the city bordering Hong Kong. Their tours usually include stops at Huawei, ZTE and drone company DJI.

Visitors from Japan get impressed and talk excitedly about forming tie-ups. Some Japanese companies have joined hands with ZTE and Huawei over the past year or two, sidestepping security concerns about these Chinese partners.

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