The Government is side-stepping concerns that the Chinese government could use a China Telecom-backed submarine cable linking New Zealand with Australia to spy on communications to and from the country.
Axin, a company believed to be representing a China Telecom joint venture, announced last month that it had secured finance from Bank of China to lay a US$100m cable that would be built by Anglo-Chinese joint venture Huawei Marine between Sydney and Auckland. The cable would become the second artery for international internet traffic and phone calls, competing with the Telecom half-owned Southern Cross Cable.
A spokeswoman for Communications Minister Steven Joyce said the Government welcomed investment in international cable projects and the benefits they could bring to New Zealand.
"The Government monitors and responds to any supplier security issues it identifies in the telecommunications sector, as well as in a number of other areas. If there were any security issues associated with any project they would be investigated."
IDC Research analyst Rosemary Spragg said she was aware of concerns being privately expressed in the marketplace.
Larry Wortzel, a member of the US-China Economic Security Review Commission established by the United States Congress in 2000 and former US army attache to China, would not speculate on whether the US government was likely to lobby against the cable.
But "a reasonable question is whether pursuant to any intelligence, defence or scientific agreement, any information exchanged by the US, Australia and New Zealand would be transmitted on the cable. That is a fair question for the two governments and could be a concern to the US," Wortzel told The Dominion Post.
China's growing interest in the telecommunications industry has rung alarm bells among some US policy-makers, both because of the economic threat it poses to US manufacturers and security concerns.
The commission warned in its last annual report that there was potential for Chinese state-owned telecommunications companies to use their products to conduct espionage. It drew attention to an incident in April 2010 when China Telecom was alleged to have "hijacked" much of the world's internet traffic, diverting it through servers in China for 18 minutes. It said it was unclear if the diversion was intentional, but the traffic, which included communications between US government agencies, could have been spied on.
The commission said Chinese officials viewed large, state-owned enterprises – such as China Telecom, which is 71 per cent state-owned – as "quasi-governmental agencies subject to government directives regarding their basic operations".
In a separate report that specifically addressed the national security implications of Chinese investment in the telecommunications sector, the commission said hacking into any fibre-optic cable was "not overly difficult", even without installing software or electronics on a cable itself.
The "easiest and consequently most undetectable" technique was to make a small kink in the cable, allowing light to radiate through the cladding. That could then be sensed by a photodetector and converted back into data that could be "sniffed for desired information in much the same way as any network data may be compromised".
The head of New Zealand's National Cyber Security Centre, Grant Fletcher, said that as a matter of policy it did not normally disclose whether it had or was likely to provide advice to the Government on any issue.
"We are concerned to make sure that New Zealand interests are protected. We provide advice and assistance to help the Government, and others if need be, to protect their information. Our primary concern is to ensure that the confidentiality, integrity and availability of information is maintained."
Asked to comment on whether it would be possible for the centre to know whether electronics had been installed on a submarine cable that allowed communications to be intercepted, he said such devices were very complex.
"Where we are aware of risks, we identify what those are and what some of the mitigations might be," he said. "What we are trying to do is inform the choice that the Government and owners of critical infrastructure would make around those sorts of things."
Calls to deepen ties after ministers' visits to Huawei
The chairman of Chinese telecommunications giant Huawei's Australian subsidiary, former Victorian state premier John Brumby, said he welcomed three visits to the company by New Zealand government ministers.
It was important that New Zealand got out in front of "geo-political trends", he said.
Speaking at the Rutherford Innovation Showcase in Auckland, Brumby said China would become one of the region's most important sources of capital, thanks to its US$3 trillion (NZ$3.85t) of foreign reserves.
Large-scale overseas investment often attracted debate and was sometimes controversial, but it should be viewed as an opportunity, rather than a threat.
New Zealand had a proud record when it came to engaging with China, Brumby said.
"The challenge now is to deepen this relationship even further.
"And it's a challenge I know your current political leaders are ready to meet."
Recent visits to China by Trade Minister Tim Groser, Communications Minister Steven Joyce and Finance Minister Bill English had been invaluable, he said.
"As a recently appointed director of Huawei Australia, I can also tell you that the time these ministers spent with Huawei in China was very much appreciated."
China would eclipse the United States as the world's biggest economy within 10 years, Brumby said.
"The rising giant that is China will continue to rise."
- Fairfax Media
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