Berlin′s dilemma: My way or the Huawei? | Business| Economy and finance news from a German perspective | DW | 02.01.2019
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Berlin's dilemma: My way or the Huawei?

As the US pushes allies to follow suit in closing the door to Chinese telecom firms, Berlin is finally waking up to cybersecurity risks. But some say Germany is still underestimating a wider threat.

"The West's theory that China would liberalize as it acquired wealth has been proven incorrect, and now each nation is faced with a fundamental question: Is it morally right, and even safe, to increase the power of a brutally dictatorial regime to provide economic benefits for our own industries?"

Nicholas Eftimiades, ex-CIA and now lecturer at Penn State, doesn't mince his words, many of which chime with the increasing ebullient stance in Washington.

And he has a point, one that must be considered as Germany decides whom to select to implement its 5G next-generation mobile broadband, which will replace its existing 4G system.

China's Huawei has been a front-runner, but that may be about to change as Washington ramps up whatever pressures it can to gain advantage in its trade spat with Beijing. In particular, it wants Germany to follow other Western countries in banning or restricting the engagement of Chinese firms such as Huawei and ZTE in their domestic internet systems.

The ongoing merger of T-Mobile US and Sprint Corp. in this case is crucial and could have huge implications for Deutsche Telekom (DT), T-Mobile's parent company. DT's promise to end the use of Huawei equipment could tip US regulators to sign off on their $26 billion (€22.5 billion) merger.

But Germany has relatively good relations with China and DT with Huawei, and Berlin has sought to keep a distance from the US's aggressive trade stance toward Beijing.

The issue goes to the heart of issues of global leadership, technological change and where middle-ranking states such as Germany stand, weighing up traditional alliances against cost and technological necessity.

What China wants, Germany has

"Germany is an important target for Beijing, because its companies are world-class in areas the Chinese Communist Party considers strategic," Peter Mattis, research fellow in China Studies at the Victims of Communism Memorial Foundation, told DW.

China targets in particular solar energy, integrated circuit manufacturing equipment and assembly technology, advanced robotics, high end computer chips and satellite technologies.

Realizing, for example, it can't compete with German carmakers, Beijing has focused on battery cells and electromobility and has long sought to develop its own commercial jet to break up the Airbus and Boeing duopoly.

China is said to employ a million intelligence agents, many of whom are focused on obtaining German technologies. The German Interior Ministry estimates that Chinese economic espionage could cost Europe's largest economy between €20 billion and €50 billion a year.

Berlin wakes up to the threat

Germany has for some time also accused Beijing of interfering in the EU, in particular in Greece and Hungary, and in the West Balkans and is pushing for a European investment screening process to better control foreign investment in strategic areas.

So the DT case will be revealing on several levels. The company said recently it was reviewing its vendor plans in Germany and other European markets where it operates.

According to the Bundesnetzagentur (BNetzA), the German Network Agency in charge of Germany's 5G auction, security is not included in the conditions for awarding the contract.

And some agree this is the way to go. "I think Germany is right to not blindly follow any foreign advice regarding Chinese 5G manufacturers," Jan-Peter Kleinhans, project director for IoT Security at Berlin-based think tank Stiftung Neue Verantwortung, told DW. "This has to be taken with a grain of salt as it's part of the ongoing trade tensions/war between China and the US."

T-Mobile US and Sprint branches in New York

The merger of T-Mobile and Sprint, the third- and fourth-largest carriers in the United States, is finally taking shape, with the transaction to close in the first quarter of 2019

A question of progress

China invested heavily in the standardization of 5G because it realized that with 3G/4G it had lost the battle over standards and was thus dependent on foreign, mainly US, companies. "With 5G they did not make the same mistake again," Kleinhans says.

"Europe has to live with the fact that China has highly competitive ICT products and plays an ever increasing role in international standardization," Kleinhans says. "If we are uncomfortable with that and if we do not want to be dependent on Chinese tech in the future, we simply need to invest, heavily, in European, indigenous innovation," he adds.

But are we missing the point?

Kleinhans and others believe China conducts extensive industrial espionage, but that this should not be conflated with 5G. "Banning Chinese 5G manufacturers from public procurement because of fear over industrial espionage does not make sense," Kleinhans says.

Huawei already provides about 45 percent of Germany's 4G base stations and so far there is been no case in which they have been exploited for industrial espionage, Kleinhans says.

"It is technically possible but absolutely not efficient to use base stations for industrial espionage. It is much easier to use 'conventional' attack vectors such as phishing mails or other means of network exploitation to compromise a network and establish persistent access to then be able to steal blueprints, data," he says.

It is difficult to assess these threats from outside the security community, David Kennedy, a telecom analyst, said. "But there have never been any reported instances of backdoors or anything similar in Huawei equipment," he told DW.

"However, it could still be a rich hunting ground in the future for hackers," Munich-based Mike Hart, VP of Central Europe at FireEye, a publicly listed cybersecurity company, told DW.

By hook or by crook: 5 ways the Chinese obtain German secrets

1. Acquisitions or buying into ideas

A 2018 report by the BfV, Germany's domestic intelligence agency, said the activities of China's intelligence services include a rising number of acquisitions of German companies. Billionaire Li Shufu, for example, has become the biggest single shareholder in Mercedes-Benz parent Daimler and robot maker Kuka was bought by Midea Group.

2. Social media or how to make false friends and influence people

In late 2017 it was reported that up to 10,000 German citizens had been contacted by fake social media accounts, mainly via LinkedIn accounts which were subsequently found to be linked to China's secret service.

3. Hacking or how to hop the clouds

The Federal Office for Information Security (BSI) recently identified small weak-link service firms as the gateways used to hack German industry, Süddeutsche Zeitung reported. The US named German firms targeted by "cloud hopper" hackers, allegedly from China.

4. The old fashioned way — bribery

In 2016, a German MP was contacted by a Chinese businessman apparently called Jason Wang, who portrayed himself as a connected business figure and offered the MP €30,000 for insights into his work. 'Jason Wang' turned out to be one of 500 fake social media accounts run by the Chinese.

5. Academic collaboration: Flattery will get you everywhere

China uses a range of open and hidden channels, offering investments, cooperation agreements, building networks and organizing joint conferences. This subtle networking can then be mobilized when needed.

Watch video 01:14

Chinese telecoms giant Huawei unveils 5G test

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