New Zealand companies and the Government need to decide whether competitive pricing offered by China's Huawei makes subjecting this country to the risk of economic espionage worthwhile, an Australian security expert says.

John Lee, of the University of Sydney's Centre for International Security Studies, said he supported a report from the United States House Intelligence Committee warning US firms not to do business with Huawei and ZTE, another Chinese telecommunications firm, over fears of spying, corruption and links to China's military and government.

"Any government has to go through an analysis over whether the competitive cost structures that Huawei can offer is offset by the threat of economic espionage," Lee said.

He said there was no evidence linking Huawei to any cases of industrial espionage, which involves spying for commercial purposes.


"But we do know that the level of sophistication of espionage [in China] suggests there is both state and corporate collusion and Huawei is one of the candidates that could potentially be part of that collusion."

He said economic espionage came in many forms, from wholesale data theft to more targeted spying.

It could, for example, be a way for China to gather information on dairy giant Fonterra, Lee said.

"If I was the New Zealand Government I would be concerned."

Huawei, which denies the committee's accusations, secured contracts last year with Chorus to supply equipment for the Government's rural broadband initiative.

Its technology is the cornerstone of 2degrees' mobile infrastructure and Vodafone's fixed-line network.

Huawei is also involved in the rollout of New Zealand's ultra-fast broadband (UFB) network.

Labour's acting communications spokesman David Cunliffe said the Government needed to launch a full, independent inquiry into its handling of Huawei's role in the UFB rollout. "What is critical for New Zealand is for the public to have confidence that our Government is fully on top of the issues and managing any risks," Cunliffe said.

United Future leader Peter Dunne said the Government needed to treat the committee's accusations seriously.

"Whether we like it or not - and regardless of the many good aspects of New Zealand's burgeoning relationship with China - they have a history of blatant intellectual property theft and are a growing military superpower," Dunne said.

Telecommunications Minister Amy Adams said opposition parties were painting a "misleading view" of the situation and the Government took network security seriously.

Rakon chief executive Brent Robinson, whose company entered a technology partnership with Huawei in August, and also does business with ZTE, said the committee's accusations were hard to believe and could be an attempt at impeding competition.

Huawei said yesterday that it had co-operated with the committee in the hope that an objective review would be conducted and misconceptions about its business clarified.


*Founded in 1987 by Ren Zhengfei, a former People's Liberation Army engineer.

*Based in Shenzen, China.

*Surpassed Sweden's Ericsson as the world's biggest supplier of telecommunications equipment this year.

*More than 140,000 employees worldwide.