Canada has banned the use of Huawei Technologies and ZTE in the country's telecommunications system over security concerns following a government review that took nearly four years.
The federal government announced on May 19 that it would prohibit the use of Huawei and ZTE equipment in Canada after "a thorough review by our independent security agencies and in consultation with our closest allies," Innovation Minister François-Philippe Champagne said in a statement.
The government faced pressure for years from other nations as well as opposition parties to ban the Chinese telecommunications firm from participating in Canada's deployment of a 5G network, one that Ottawa itself has said will "usher in a new industrial era that will create significant economic and social opportunities for Canadians."
What is 5G?
5G technology has long been touted as a game changer for wireless communications, one that will allow faster communication at higher speeds with more devices. The technology that supports the network has been redesigned from previous generations. 5G, or fifth generation, will allow more devices – everything from home appliances to cars – to connect to a network and each other without bogging down the system.
"5G will be an entirely new, flexible network that will interface with all existing and evolving generations of wireless technology to come," the federal government's communications research centre said.
"It will be faster, more flexible and will allow billions of new devices to be connected to each other."
Why did Canada ban Huawei?
Huawei has faced accusations that its technology could provide a potential backdoor for espionage, given its ties to the Chinese Communist Party. Huawei and the Chinese government have vigorously denied the accusation, saying the company poses no security threat.
Here is what Ottawa had to say about its decision – one that was widely expected – to ban the Chinese telecommunications firm.
"The Government of Canada has serious concerns about suppliers such as Huawei and ZTE who could be compelled to comply with extrajudicial directions from foreign governments in ways that would conflict with Canadian laws or would be detrimental to Canadian interests," the government said in a policy statement.
"Canada's closest allies share the similar concerns about these two suppliers. Given the potential cascading economic and security impacts a telecommunications supply chain breach could cause, allies have taken actions to enable them to prohibit the deployment of Huawei and ZTE products and services in their 5G telecommunications networks."
What does banning Huawei mean for Canadian companies?
While some of Canada's telecommunications giants had originally considered working with Huawei, they have since decided to go with other companies – including Sweden's Ericsson and Finland's Nokia – to build out their 5G networks.
Ottawa says any use of 4G equipment or managed services from Huawei and ZTE must be removed by December 2027. All existing 5G equipment and managed services must be removed or terminated by June 2024.
What does the ban mean for Canada's relationship with China?
Canada's relationship with China deteriorated following the 2018 arrest of Huawei executive Meng Wanzhou at the behest of the United States. Within days, Chinese authorities arrested Canadians Michael Kovrig and Michael Spavor. The diplomatic saga came to an end in September 2021, when all three were released after U.S. prosecutors reached a deal with Meng.
It is unclear what impact the 5G ban will now have on Canada's relationship with China.
China's foreign ministry spokesperson Wang Wenbin on May 20 criticized Canada's decision, saying it was made "without any solid evidence."
"This move violates principles of the market economy and free trade rules, and severely harms the Chinese companies' legitimate rights and interests," he said.
"The Chinese side is firmly opposed to it. We will conduct a comprehensive and rigorous assessment and take all means necessary to safeguard the Chinese businesses' legitimate rights and interests."
With files from The Canadian Press and Reuters
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.