US seeks to block China Mobile’s entry, escalating tension

US President Donald Trump has threatened additional tariffs on US$200 billion of Chinese imports that could be implemented if China imposes counter-measures.
US President Donald Trump has threatened additional tariffs on US$200 billion of Chinese imports that could be implemented if China imposes counter-measures.PHOTO: REUTERS

WASHINGTON/BEIJING (BLOOMBERG, AFP) - The US moved to block China Mobile Ltd. from entering its telecommunications market on national security grounds, launching another salvo in the fight between the world’s two biggest economies days before they’re expected to impose tariffs on each other over trade.

The Federal Communications Commission should deny China Mobile's application, submitted in 2011, the National Telecommunications and Information Administration (NTIA) said in a filing distributed by email on Monday (July 2). NTIA is a branch of the Commerce Department.

Unlike ZTE, the Chinese telecom equipment maker that was blocked off from US suppliers in April for violating a sanctions settlement, China Mobile makes most of its revenue domestically and may be less vulnerable to trade blocks.

ZTE shares plummeted after the announcement because it relies on US-made components for some of its products.

The US in June reached a deal to allow ZTE to get back in business after the Chinese telecommunications company pays a record fine and agrees to management changes.

The US and China have quarrelled this year over trade, and US officials have alleged that China engages in widespread theft of intellectual property.

The US is set to impose tariffs on US$34 billion (S$46.6 billion) of Chinese goods on Friday, and another US$16 billion may follow. China has vowed to retaliate in kind.

US President Donald Trump has also threatened additional tariffs on US$200 billion of Chinese imports that could be implemented if China imposes counter-measures.

The US intelligence community and other officials found that China Mobile's application "would pose unacceptable national security and law enforcement risks," according to the NTIA filing.

Asked about the move at a regular news briefing on Tuesday (July 3), Chinese foreign ministry spokesman Lu Kang said the US “should not speculate and repress Chinese enterprises in this way”. 

“We urge relevant parties in the US to abandon the Cold War mindset and zero sum game,” added Kang, who also warned that China was “well prepared” if the US made good on its tariff threats. 

“We will use a package of necessary measures to ensure our rights and interests,” cautioned Kang.

China Mobile is the world's largest mobile phone operator, with about 899 million subscribers. In the NTIA filing, the carrier indicated it wanted to offer international voice traffic between the US and foreign countries, and didn't intend to offer mobile service within the US.

"The deepening integration of the global telecommunications market has created risks and vulnerabilities in a sector replete with a broad range of malicious activities," the NTIA said in its filing.

The Chinese government could use links established by China Mobile for economic espionage and intelligence collection, according to the filing. Customers could include fixed and mobile network operators, calling-card companies, and business customers.

Officials had "significant engagement" with China Mobile but weren't able to resolve concerns, David Redl, assistant secretary for communications and information at NTIA, said in a news release.

FCC spokeswoman Tina Pelkey said the commission would review the filing.