China used Huawei to hack network, says secret report

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Secret intelligence reports given to Australian officials outlined a case in which Chinese espionage services used telecommunications giant Huawei’s staff to get access codes to infiltrate a foreign network.

The Weekend Australian has confirmed from a national security source that the intelligence highlighted the Chinese company’s role in cyber espionage.

Huawei has been banned from any involvement in building the new 5G network in Australia ­because of security fears but Chin­ese officials have urged the government to rethink the decision.

The new information has emerged ahead of the first Australian ministerial visit to China in a year. Trade Minister Simon Birmingham is due to go to Shanghai next week, and a meeting between Scott Morrison and President Xi Jinping is expected at the APEC leaders’ meeting over the next two weeks, amid hopes of resetting the strained relationship.

In what is the first known ­instance of Huawei being used by the Chinese government as a ­conduit for intelligence gathering, the national security source said an unnamed “high-risk vendor’’ — confirmed by The Weekend Australian to be Huawei — had ­featured in intelligence reporting.

“I am aware of intelligence that indicates that certain high-risk vendors have been asked for ­assistance by foreign intelligence services,’’ the source said.

The Weekend Australian has confirmed that the attempted breach related to a foreign network, not an Australian one.

It is understood company officials were pressed upon to provide password and network details that would enable Chinese intelligence services to gain access.

It is not known if the attempted hack, which occurred in the past two years, was successful.

While some governments, ­including Australia’s, have locked Huawei out of sensitive projects or acquisitions, the risk has until now been regarded as theoretical.

Huawei was one of two companies banned from participation in the construction of Australia’s 5G network, which is expected to be up and running by next year. The other was Chinese firm ZTE.

The Weekend Australian ­understands the criteria the ­government used to determine risk around network vendors ­centred on capability, form and intent — that is, did a company have the capability to breach a network and a history or intention of doing so. One key criterion was whether the company operated in a ­jurisdiction where corporations could be compelled to provide ­information to intelligence services. Late last year, China passed its National Intelligence Law, which obliged citizens and organisations to co-operate with and collaborate with China’s intelligence services if required.

Australian Strategic Policy Institute cyber expert Dannielle Cave said the rule placed Chinese corporations such as Huawei in an impossible situation.

“Huawei is a good company that provides good, cost-effective equipment around the world but this law makes it very difficult for Australia to involve Chinese companies in critical national infrastructure,’’ Ms Cave said. “A lot of this goes straight back to that law. It is out of the company’s hands.’’

Ms Cave said Huawei had been implicated in alleged cyber theft of data from the African Union’s Ethiopia headquarters. According to multiple reports this year, data was transferred every night from the building for five years. “There’s no proof that Huawei was asked to participate or turn a blind eye to the breach, but we know that there was a breach and Huawei was the key provider,’’ Ms Cave said.

It is not clear if it is the same breach. Huawei has consistently denied any involvement in espionage. Yesterday its Australian spokesman attacked what he ­described as “more tired, unsubstantiated comments from anonymous sources’’.

“Huawei is the world’s largest telecommunications supplier,” the spokesman said. “We partner with the world’s biggest telecom operators because they trust our equipment and trust our people. Because of our proven record and our investment in ­cutting-edge research and development, our business will continue to grow and succeed. For 30 years Huawei has provided safe and ­secure technology to the telecom industry.’’

Chinese officials also voiced their displeasure at the 5G ban, arguing it could set a precedent for other countries. “We say to the Australian government, you should rethink the decision,’’ a Chinese official told Australian journalists on a ­Chinese government-funded tour this week.

The group was granted background briefings with a series of senior officials with responsibilities for international relations from both the government and the Communist Party of China. All raised the ban on Huawei as a complication in the relationship.

“Australia is seen by many people in China as the pioneer of anti-Chinese thinking,” the official said, referring both to the Huawei decision and the foreign-interference legislation introduced last year, which Chinese authorities believe is aimed at them.

A second official said: “This business is not over, and actually we are still in discussions with the Australian side.”

Huawei head of corporate affairs Jeremy Mitchell said Australian security agencies had taken a negative approach to the company and had declined invitations to visit its headquarters in China and inspect its processes. He noted that rival vendors of 5G technology, Eriksson and Nokia, sourced their hardware from China in joint venture with state-owned enterprises.

Officials said they had noted positive comments about the relationship made by Mr Morrison, both in a speech to the Chinese community and also in an interview with the Chinese media.

By David Uren
The Australian

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