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Japan to exclude Huawei, ZTE from gov't procurement: source

The ZTE Telecommunications equipment company logo is seen displayed on a smart phone. (LightRocket/Getty/Kyodo)

TOKYO (Kyodo) -- Japan plans to effectively exclude Chinese telecommunication equipment giants Huawei Technologies Co. and ZTE Corp. from public procurement, a government source said Friday, amid concerns about security breaches that have already led the United States and some countries to ban them from supplying infrastructure products.

Cybersecurity officials of relevant government agencies will likely agree in a meeting as early as Monday to block the Chinese firms from taking part in government procurement without explicitly naming the two companies in consideration of the potential impact on Tokyo's relations with Beijing which have shown signs of improvement, the source said.

The officials are expected only to confirm that public procurement contracts should take into account security aspects, the source added.

While declining to comment on the details of government procurement policies, Chief Cabinet Secretary Yoshihide Suga told a press conference, "Ensuring the cybersecurity of government agencies has become increasingly important. We will deal with the matter from various perspectives."

Defense Minister Takeshi Iwaya also pledged efforts to ensure security. According to a Defense Ministry official, the ministry does not use products from Huawei or ZTE in the key components of its information systems.

China expressed "serious concern" about moves by the Japanese government, with Foreign Ministry spokesman Geng Shuang emphasizing that the essence of economic and trade cooperation between Beijing and Tokyo is "mutual benefit and win-win."

"We hope that Japan will provide a fair competitive environment for Chinese companies to operate in the country, and will not do anything that would undermine mutual trust and cooperation," Geng told reporters in Beijing.

In August, the United States, Japan's key ally, enacted the National Defense Authorization Act that bans the government's use of Huawei and ZTE technology products and services out of concern over their connections with Chinese intelligence.

Australia has also excluded both firms from its next-generation mobile network.

"There have been global concerns about the two companies' ties with the Chinese government. But we need to make sure that we will not stop the recent trend of improvement in Japan-China ties," a Japanese government source said.

Canadian authorities arrested Meng Wanzhou, the chief financial officer of Huawei and the daughter of its founder, on Saturday in Vancouver at the request of U.S. authorities, the country's Justice Department said Wednesday.

In April, the U.S. Commerce Department also announced a ban on U.S. firms shipping products to ZTE, alleging the company violated its sanctions against North Korea and Iran.

Huawei and ZTE have played a crucial role in the "Made in China 2025" blueprint, under which Beijing has been trying to create global leaders in robotics, artificial intelligence and other advanced technologies at the state's initiative.

The two manufacturers are known as leading companies in the field of next-generation 5G mobile communications networks.

If Huawei and ZTE face difficulties in operating their businesses in the future, it could spell trouble for China's economy, which has already shown signs of slowing down against a backdrop of a tit-for-tat tariff trade war with the United States.

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