Huawei a key to Chinese trade talks

Chinese telecoms company Huawei is set to become a pawn in the controversial free trade agreement (FTA) review between China and Australia.

Prime Minister Tony Abbott has made it clear he wants a free trade agreement between the two countries within 12 months. Against this backdrop federal Trade Minister Andrew Robb, who is touring China this week, described free trade talks with China as his "highest priority".

Given the political tightrope that will need to be walked - both locally and in China - to make it happen, Huawei will play a key role.

Huawei opened for business in Australia in 2004, hoping to use the country to improve its image. It didn't go according to plan.

Indeed the company and the Chinese government is still stinging over a decision by the former Australian government to prevent Huawei from tendering for the national broadband network because of "national security issues". That was the only explanation given at the time by the Gillard government.

It was a decision that cut deep because Huawei is privately owned and, for all the suspicion and allegations of spying, there have never been any complaints of phone hacking or wrongdoing from the companies for which Huawei works. These include eight of the world's nine national broadband networks - BT in Britain, Nucleus Connect in Singapore, New Zealand's Ultra-Fast Broadband (UFB) project, Telekom Brunei, TM Malaysia, Qtel in Qatar, Camtel in Cameroon and CMC in Benin.

But with a Coalition government now in power and an FTA again on the table, the tide could be about to turn. Communications Minister Malcolm Turnbull discussed for the first time the ban and the issue of spying with BRW's Nassim Khadem.

"Even if you accept the premise that Huawei would be an accessory to espionage - I'm not saying they will be, I'm just saying that's the premise - if you accept that, you then have to ask yourself, does the equipment that they would propose to sell have that capacity?" This, according to Turnbull, becomes "a more technical" question.

Turnbull has promised to review the banning order and the probability is that Huawei will be allowed to tender for some part of the NBN.

Such a symbolic gesture cannot be underestimated for the company or the Chinese government as Huawei has always been the friendly face of China. It is not government owned or a state-owned enterprise and it is owned by the staff. If Huawei can win over Australia, a close American ally, it will help soften the negative image it has in the US.

The US Congress launched an investigation into Huawei and its smaller Chinese counterpart, ZTE, in 2011. The Congress report, released last October, accused both companies of being a "national security threat". Congressional committee chairman Mike Rogers issued a blunt warning to US companies: "Find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about national security."

Some believe the US paranoia is based on protectionism. In less than three decades, Huawei has grown from fewer than 20 staff and less than $2500 in capital in 1987, to a global giant with more than 150,000 staff, a presence in more than 150 countries and revenue of more than $US34 billion ($35.2 billion). This is in sharp contrast to companies such as BlackBerry, which are struggling to survive.

It explains why within weeks of the decision to block Huawei from the NBN, the local arm of Huawei signed a sponsorship deal with the Canberra Raiders NRL team. It realised it needed to change its image globally and Australia would be the most effective way to do it. This, plus setting up an independent board, and using Australia as a test case to offer "phantom shares" to employees, are a few of the ways it is trying to improve its image. However, part of Huawei's problem is its own doing. Its lack of transparency has not helped its cause.

In an interview conducted in Shenzhen with one of Huawei's global directors and a member of the company's Australian board in March, Chen Lifang said: "Outside of China Huawei is the biggest company no one has heard of."

She is right. For a company that connects one-third of the world's population to its telecommunications equipment, devices and software, is the second largest telecoms equipment maker in the world behind Ericsson and has become the third largest smartphone manufacturer behind Apple and Samsung, Huawei's profile is ridiculously low.

In Australia, Huawei's accounts show it made a profit of $7 million in 2012, almost double the $3.8 million it made in 2011. It is chicken feed to what it can make if it can crack the US market.

Getting a piece of the NBN in Australia might help it on its way, which is why it could be a bargaining chip in the negotiations between China and Australia to turn the elusive FTA into a reality.