China is mulling retaliatory action against European telecom firms Nokia and Ericsson if the European Union follows the US and UK in blocking Huawei from participating in member countries' 5G networks.
That's according to a report by the Wall Street Journal, which says that China's Ministry of Commerce is considering export controls that would prevent Sweden's Ericsson and Finland's Nokia from supplying products they manufacture in China to any other country.
A person familiar with the matter told the news outlet that Beijing would use the worst-case scenario only if European countries decide to ban Chinese suppliers from their 5G networks.
Last week, the British government told telecom firms not to purchase 5G equipment from Huawei from the end of this year and to also remove all existing Huawei components from their 5G network by 2027.
The government has already allowed Huawei to build more than a third of the UK's next generation of internet infrastructure, in a decision that eventually led to a rebellion on the Conservative Party's own benches. Since then, a large number of Tory MPs have been demanding a ban on Huawei over concerns that it could share sensitive data with the Chinese government.
So far the EU has not recommended an outright ban, but issued a 'toolbox' of security standards earlier this year, which member countries should apply while using high-risk vendors in their 5G rollouts.
The guidance released by the EU didn't name Huawei, but offered the member states a voluntary way to limit Huawei's presence in their networks.
The EU's guidelines call for an assessment of the risks posed by different vendors and to restrict the role of high-risk vendors in critical infrastructure components like vulnerable core networks. They also recommend member countries to avoid depending on a single vendor while building next-gen mobile communications infrastructure.
EU is expected to soon publish a detailed report on how its member states have adopted the security standards in the last six months.
Beijing is not happy with the idea of Chinese telecom firms being banned in EU or any other part of the world. Earlier this month, Liu Xiaoming, China's ambassador to London, warned British lawmakers that eliminating Huawei from UK's infrastructure would send a "very bad message" to Chinese firms and investors.
A report by the National Institute of Economic and Social Research in UK also warned that the country's GDP could decline by up to 0.75 per cent if a ban on Huawei results in a wider trade conflict with China.
The report said that China could respond by announcing restrictions against Britain, which would eventually affect GDP, increase inflation and send interest rates up.
Before the British government announced decision to ban Huawei, the Chinese firm was reportedly seeking to delay its potential removal from UK's infrastructure until after elections in June 2025, in hopes that the future government may reverse the decision. The company had also requested a meeting with the Prime Minister as last-ditch effort to strike a deal to delay its removal.
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