July 3, 2018 / 5:40 AM / a year ago

Breakingviews - U.S. veto on China Mobile could grow wider

An investor checks stock information on a mobile phone at a brokerage house in Shanghai, China June 20, 2018. REUTERS/Aly Song

HONG KONG (Reuters Breakingviews) - A U.S. setback for China Mobile could set a precedent. The Chinese telecoms operator’s application to offer international calls from America is likely to be rejected, after seven years mouldering in the Federal Communications Commission’s inbox. With a unit of the Commerce Department recommending an FCC veto based on security concerns, a campaign to cramp Beijing’s ability to monitor overseas traffic from Chinese companies and individuals could be getting underway.

The $180 billion carrier makes almost all of its money inside the People’s Republic, and most of that from data. So China Mobile’s inability to win a so-called Section 214 licence will be financially negligible. However, there are broader implications.

As more Chinese individuals and companies move overseas, the Communist Party has intensified efforts to keep them in line. That’s easier if communications pass through Chinese-owned networks. Thus, a traveller in the United States brings the government’s internet firewall with them; a China Mobile user visiting Washington, D.C. can get roaming data through AT&T, but their SIM card will still block access to Google or Facebook, even if they stand on the White House lawn. At the same time, Beijing worries that U.S. intelligence could monitor messages between, say, Bank of China’s New York offices and headquarters.

Similarly, Chinese people can’t load foreign messaging services like Facebook’s WhatsApp while roaming, but they can still use Tencent’s WeChat - by far the most popular communications tool in China, but one which is monitored and censored.

American concerns about Chinese espionage include worries about Beijing’s hold over its citizens in the United States. Thus, it’s unlikely the U.S. response will end with rejecting this application. Identical licences held by fellow state telecoms champions China Unicom and China Telecom might be revoked next. And having hammered telecoms equipment maker ZTE for sanctions-busting, Washington may start eyeing the U.S. operations of tech giants Alibaba and Tencent. Doing so wouldn’t have much economic impact, but it would touch Beijing in a very sensitive spot.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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