SYDNEY—Australia is preparing to ban Huawei Technologies Co., Ltd., from supplying equipment for its planned 5G broadband network after intelligence agencies raised concerns that the ruling Chinese Communist Party could force the Chinese telco to hand over sensitive data, two sources said.

Western intelligence agencies have for years raised concerns about Huawei’s ties to the Chinese Communist Party (CCP) and the possibility that its equipment could be used for espionage. But there has never been any public evidence to support those suspicions.

Huawei, the world’s largest maker of telecommunications network gear and the third largest smartphone supplier, has promised that Canberra will have complete oversight of 5G network equipment, which could include base stations, towers, and radio transmission equipment.

That sort of oversight model has been accepted by other countries—notably the UK, where a special laboratory staffed with government intelligence officials reviews all Huawei products.

However, sources who claimed to have been briefed by British intelligence told Asia Times that core switches installed by the telecommunications company in an upgrade were behaving suspiciously. The sources claimed the switches were letting data in and out to a third party. These reports have yet to be publicly confirmed.

Other Western countries, including New Zealand, Canada, and Germany, also say they have sufficient safeguards for assuring that Huawei equipment does not contain “backdoors” or other mechanisms for secretly monitoring or collecting information.

Australian intelligence agencies have told lawmakers that oversight will not allay their concerns, two political sources who have been briefed on the matter told Reuters.

“It is a Chinese company, and under communist law they have to work for their intelligence agencies if requested,” said one of the government sources. “There aren’t many other companies around the world that have their own political committees.”

Both sources declined to be identified because they were not authorized to speak to the media.

Huawei has already been mostly shut out of the giant U.S. market over national security concerns. Its business serving small, rural telecom operators is now at risk after new attacks on the company in recent weeks by some U.S. lawmakers.

The company was targeted by a U.S.-China Economic and Security Review Commission report, which was released in April, that said the company has extensive ties with the CCP. Ren Zhengfei, the founder of the company, was a former officer in the People’s Liberation Army (PLA). He continues to run the company today.

The move to ban Huawei in Australia comes as tensions mount over China’s growing power and ambitions in the region.

Australia’s 5G service will require a dense network of towers that would then be leased to mobile providers such as Telstra Corp.

Mobile carriers typically have access to sensitive personal information, such as internet search history or emails. But in Australia and most other countries, there are strict laws governing when and how they can do so.

Australia’s intelligence agencies fear that if mobile operators rely on Huawei’s equipment, the Chinese company could develop a means of collecting data or even undermining the stability of the network. Chinese law requires organizations and citizens to support, assist and cooperate with intelligence work.

Huawei Australia’s chairman, John Lord, said that the law does not apply to its operations outside of China.

“That law has no legitimacy outside of China,” Lord said. “Within that country, any information coming through us and any equipment we put into their national infrastructure is safe to the best of our ability, and it’s secure.”

U.S. Influence

In 2012, Australia banned Huawei from supplying equipment to the country’s National Broadband Network, which has been hampered by technological failures. Australia believes that the 5G network, which will provide mobile internet speeds 50 to 100 times faster than current technology, will be the cornerstone for future innovations such as driverless cars. That makes it crucial to keep the network secure.

Turnbull in February received briefings from the U.S. National Security Agency and Department of Homeland Security on the threat from Huawei, one source familiar with the meeting told Reuters.

“The UK and New Zealand, they have decided that the risk of Huawei is worth it for the benefits of the network. For the Australian Security and Intelligence Organisation (ASIO) and the U.S., it is not worth the risk,” a second political source said.

Australia-China Tensions

Although Australia’s intelligence agencies are unwavering in their advice, Turnbull has yet to formally sign off on the Huawei ban.

One of the sources familiar with the process said the government is “in no great rush to confirm the ban.”

“It is going to highlight the anxiety that Australian lawmakers have about the rise of China, and it is not going to do any good for the Australian-China relationship,” said Adam Ni, visiting fellow in the Strategic and Defence Studies Centre at the Australian National University.

Despite the trade pressure, Turnbull can ill afford to overrule the country’s security authorities amid a rise of Chinese hawks within Australia’s government.

Turnbull acknowledged in April that relations with China, which last year included two-way trade of A$170 billion ($125.6 billion), had soured over Australia’s recent push to combat the “rapidly escalating” threat of foreign interference. However, Turnbull said he was confident that the misunderstandings would be resolved.

“From time to time, there will be differences in terms of particular issues, but the important thing is we deal with them as friends with respect. Mutual respect is the absolute key. And that’s what we undertake and I know that’s what characterises our relationship,” the prime minister said at the Australia China Business Council on June 19.

“Sometimes you’ll get issues at a fairly granular level. You know recently there were reports of containers of wine being held up on the docks. Well, we went to work to ensure that that could be resolved and indeed so it was.”

In rare public testimony, Australian Security Intelligence Organisation director-general Duncan Lewis this year warned that foreign espionage, interference or sabotage could inflict “catastrophic harm” on the nation’s interests—remarks that were widely considered a thinly veiled reference to China. The warning spurred a backbench lawmaker, who sits on the country’s important parliamentary Intelligence and Security Committee, on June 18 to urge Turnbull to reject Huawei, a source familiar with the details of the party-room meeting of the ruling government told Reuters.

Australian intelligence agencies have said there was “credible evidence” that Huawei was connected to the Third Department of the PLA—an arm of the Chinese military’s cyber-espionage network, according to Professor Clive Hamilton, the author of the book Silent Invasion: China’s Influence in Australia.

Hamilton says in his book that Huawei has spent time creating a public image of trustworthiness by setting up an Australian board as a front: “Although it is not a state-owned company, it would be naive in the extreme to believe a company that with government support turned itself into the world’s second-biggest telecommunications equipment maker … did not have daily links with China’s intelligence services.”

Turnbull did not directly address the comment, the source said, leaving his own party uncertain of his leanings.

Australia has already taken a number of steps to protect the nation from foreign nation’s attempt to exert influence.

A foreign interference legislation was also passed in June, which will require lobbyists to declare connections to foreign governments. Another law banning foreign political donations has yet to be introduced in the lower house.

Pacific nations Papua New Guinea and the Solomon Islands have signed on to a joint undersea internet cable project, funded mostly by Australia. The July 11 pact will prevent Huawei from laying the equipment, which could be used for espionage.

By Colin Packham. Additional report by NTD reporter Janita Kan.