but many us lawmakers are concerned about another chinese tech giant, huawei. chinese government could be using "back doors" in huawei products to infiltrate american networks. that political pressure has led leading american phone networks verizon and at&t to abandon its smartphones as politicians try and stop the company doing any business in the us, asjoe miller reports from south canaan. it changed everything. in rural pennsylvania, retirees like this woman are finally enjoying superfast broadband or cable tv thanks to a companyjust up the road. all the magic kind of happens here. even with the help of government grants, she needed the best value equipment he could find, which led him to chinese tech giant huawei. we estimated it was going to save us at least several hundred thousand of dollars with that solution. while the products already banned the use in the us military, but now lawmakers are turning their focus to thousands of rural communities such as this one, many of which only have high—speed broadband thanks to government subsidies. and they say t

huawei has a router. they will sell it to an american company and they will take off huawei and put on their sticker and you have a chinese company beholden to chinese government. if they say we want you to go into that router and get the secrets of the u.s. government, they have to do it. especially in telecommunications. that is what's happening now. they embed themselves that way by white labeling. they use their american sub-contracting unit. they know nobody will allow them to build an american base, you hire an american company. that's the prime contractor. they come in as a sub-contractor to the prime contractor and they are the ones doing the work. we think we hired an american company, but the work is done which a sub-contractor controlled by z.t.e. or huawei, that's another way they are doing it. one day we're going to wake up and realize that in our own country embedded in our toiks systems, in our cable, in our routers, in our internet are a bunch of component pieces that not only leave vulner

with the size and power zte and huawei * have.re in your network and you have got no place to go but china for your equipment. lou: the u.s. is trying $suggest they are buying lot of parts from u.s. companies for the finished product. but it's the finished product where the power to be a national security threat rests. >> i'll tell you, lou, for a long time the strategy has been -- i have been at cisco when huawei * was taken to court. they stole every bit of the technology for routers. they are going to take this over one bite at a time it in aligns with their efforts to control the interest nets and cyberspace. do they want control of all domain. sea, land, air and cyberspace. they will stop ating into get there. lou: the south chain today sea we are talk about 40% of the world's shipping. the national security issues loom large here. but the larger issue with national security is the economy itself. we have simply as you have said, opened ourselves up to the theft of intellectual property to actual -- to all sorts of technologi

huawei, and zte, there has been a tendency, especially with huawei, to embed malware and spyware.tion is very importantthis may lead to china stepping back from some of the tariffs they want to put in place. i think it will lead them to negotiate. >> i'm going to jump in. we have breaking news and headlines. i would like your reaction, representative. >> sure. trish: we're getting some reports right now, this is south korean media is reporting that north korea is threatening to cancel its meeting with president trump in june over joint-u.s. south korean military drills. these headlines just crossing. the same media is reporting that north korea has already canceled its summit with south korea. what is your reaction to this? do you believe that kim jong-un willing to risk it all by canceling his summit in singapore with the president of the united states of america, congresswoman? >> i haven't seen that report, trish, but i would say that it has hopeful that kim jong-un would make this meeting. i think he will probably, continue to push to make this meeting. i don't know what he is

if you are qualcomm, you've got to be a little concerned because zte along with huawei are trying to dominate 5g, that is important, that's critical for qualcomm's future. considerations on both sides of this. this shows you how complicated things get. liz: good point because you want to see whether or not the president is fighting for what the u.s. needs are. here's what the two sides have reportedly agreed on this broad outline, save zte, u.s. companies could do business with zte, zte would make management changes and possibly pay significant fines. is that strong enough? >> probably not. got toemember that it was wilbur ross, president trump's n commerce secretary who imposed that seven-year ban which is essentially a death sentence. zte did pretty bad things, it lied to get the plea deal that it arrived at last year. it lied after the plea deal, and, of course, reneged on the plea deal by not implementing the provisions, something serious has got to be done. probably a lot more than $300 million fine, we need to show huawei which did some of the same things iran and north korea d

scarlet: who is leading the way when it comes to dealing with cta or huawei in terms of not following.s. laws? is it the executive branch of the white house, i'm not clear? caitlin: i don't think it's clear. on this issue with the iran sanctions out of the commerce department would say they are taking the lead. that's a law enforcement and trade enforcement issue. this larger issue with tariffs and certainly that would be robert lighthizer and treasury secretary mnuchin would like their taking the lead. even if trump says we will take care of zte, in this trade deal, that's not going to ease off scrutiny and that company and while way are facing -- while way -- apart from these trade issues, there's a big national security concern. folks fromot of different agencies with hands that play in this. scarlet: imagine if you are on the chinese side and you need to talk to someone, or any other country. caitlin: or imagine wilbur ross and how he is trying to maneuver with this. scarlet: caitlin webber, thank you for joining us. still ahead, "curb your enthusiasm." why loriabout calvasina is

as well as leading mobile phone 4g connectivity in partnership with chinese firm huawei, they've alsoech to enhance their cultural heritage that brought us here. the faroese government has just announced that it will be making music education software meludia available completely free to all of its 50,000 citizens. so there's only one really specialised high—level music school here in the capital, in torshavn, but people living on other islands can't have that. so this is a perfect country to use technology to spread music education and music literacy throughout all of the 18 islands of this country and make music accessible to all. the web—based platform aims to teach music in the same way as a language and claims to be beneficial to everyone, from children to people with learning difficulties, right up to professional musicians. we don't have access to the big universities or the best teachers in the world if we don't use the digital platforms in any area you could think of, so we are very fond of the digital possibilities for our citizens. they sing. it was not that difficult to ge

huawei under investigation as well. thank you so much for joining us.heck out those charts at gtv go. catch up with some of the key analysis and save them for your reference. this is bloomberg. ♪ ♪ betty: a quick check on the latest headlines. aig shares tumble to the lowest in two years after earnings fell short of estimates. dropped 10 and hundred 38 -- $938 billion. the ceo is reorganizing the company. they looking to enter new businesses. tesla shares stumbled -- yvonne: tesla shares stumbled more than 5%. he called questions about cash flow to dry and boring to answer. snubbeder who was speculated that the numbers did not tell a good story. ♪ yvonne: 8:00 a.m. here in hong kong. welcome to "bloomberg daybreak: asia". the next start after a rally on wall street spotters out. markets also watching day to from beijing. trade cap close-out by 16%. from bloomberg's global headquarters i am -- betty: futures trading to foreigners offering a new way to bet on the economic expansion. a billion-dollar hong kong ipo. ♪ >> it is hard to home down one story th

into all kinds of discussions about our trade relationship with china, in particular considering huaweiu.s.. even still, other types of cooperation seemed to be painted with this national security process, even though there are no direct allegations of wrongdoing by the chinese. betty: it does seem that way. reports ofk to these the auto import tariffs, what do you make of them? how likely is something like that will pass? >> it is hard to say. this administration has been focused on traditional, capital-intensive, 20th century , and nows, steel automobiles, so it is not that surprising when you look at the focus. negotiations, a major sticking point has been u.s. insistence on content protection for the united states, raising the amount of domestic content produced in north america. we have come to expect this type ebb and flow in terms of the threat of living trade protections by this administration. betty: sometimes it feels like from day to day we don't know more than we did a week or month ago. it often depends on what we get on twitter. investorsfficult for looking to make actual

in fact, every major telecom in china, huawei, norway, every -- they all depend on components from the united states. hopefully what i would hope to arrive at is a balanced trade situation, a balanced gee wrote political -- geo political situation between the united states and china. right now it is out of balance. when you allow imbalances to persist in international nationings, it -- nations, it leads to conflict, wars, and showdowns. that's what imbalances lead to. imbalances leads the country that is dominant to take advantage of the countries that are not unless you agree to surrender to them. this issue of china and z.t.e. is a terrible mistake. if america cuts a deal with z.t.e. that says pay a couple of$00 in -- hundred dollars in fines, and that's it, these sanctions against them are punishment for evading and breaking sanctions. if you basically wave that off in exchange for a deal for agriculture, they are not -- they've basically done nothing wrong. these farmers are victims of retribution. what we should say is if you don't lift the tariff on our farmers, we will do the sa

they even have subcontractors in zte -- people could be using huawei technology or something and notnow it. >> in your mind, is there no negotiation to allow zte to survive? they told the trump administration they're going to go bankrupt. they're going to go out of business and we need to figure this out. is there any way you'd be comfortable dealing with zte ever? >> first of all, what about the american companies like the chinese have bankrupted, like the american companies that partner with the chinese companies. the chinese steal everything you do. once they figure out how to do, we don't need you anymore, we'll do it cheaper, because our government subsidizes us, and you're out of business. number two, we didn't put them out of business, we just said we're not going to sell them american semi conduc semiconduc. i don't feel about that. i don't work for the chinese government. >> i understand, but you look at it the way you look at it, which i completely understand, the way we've done this for a long time. the president is linking a lot of things that many people are not comforta

these concerns around companies like zte and huawei. a real challenge and the kind of rope-a-dope that i think he's received from the chinese diplomats so far, every analysis i've seen says that china totally outfoxed him in this last round of negotiations >> senator, let's stay on the topic of technology. mark zuckerberg, facebook's ceo, before europeans a s we speak, answering questions. he's in the hot seat, just like he was in the hot seat before your colleagues on capitol hill. lee cooperman, the famed hedge fund manager who you may know was on my show in the last hour, loves the stock, but worries about government overreach on regulation does he have something to worry about today? >> he should have something to worry about, because we're still trying to grandpple with the misinformation and disinformation that the russians used with facebook in terms of interfering in our elections and they used the same tools in the french elections we're still trying to get our arms around something that where somebody posts, as if they are lee

>> for cheaper phones, right, you have huawei and other competitors who can, but to the point if you're going to buy 1000-dollar phone i really do think they have a huge moat around their brand. neil: you're telling me actually the apple phone is the fourth biggest seller in china? >> i know, i actually, i don't know that fact. i think that sounds about right. neil: he could have just made it up. >> but also, even if it is fourth, i think there is an order of magnitude with difference of number ever phones sold in china by apple versus someone like huawei or some of the national brands there. neil: is there a tit-for-tat there too, all of sudden the chinese, if the united states is going to play hard ball with us, aluminum and steel, we'll play hardball with them not only agricultural but extend it to technology players? which i imagine would be tim cook's biggest fear? >> absolutely f we wind up with a trade war with china it would absolutely impact apple's bottom line. what a lot of investors are hoping for, that apple will continue to see growth in china. that is one of the few place

the senate and house armed services committees, they don't want zte or huawei to be dominant telecomviders in the united states or really anywhere in the world. this is a communist regime after all that is running, probably the world's most sophisticated surveillance state. do we, they're very active -- trish: that is obvious. you don't want, certainly i as consumer wouldn't be too interested in signing up for zte's business no matter how good of a deal it was. look, i think it's a little strange to your point. it may be part of a bigger, broader conversation in terms of negotiations with china and north korea that we're maybe not as in tune with but, any other possible reason why this is okay? >> i think you're asking what a lot of people are, that is what is driving this, a really bipartisan effort in the congress to put new rules to essentially override what they think the president is doing and to punish zte, because absent some give on these other related issues, north korea, the larger china trade issue, it doesn't, it doesn't seem to be appropriate punishment because the origi

agencies, to spy on our defense contractors that we considered after an investigation of zte and huaweigue on the russia investigation introduced legislation to prohibit the u.s. government from buying technology and doing business with zte, a bill that i'm co-sponsors. those are pretty powerful reasons not to make a special deal for zte. but even more compelling, rachel, frankly is the fact that they were cheating on sanctions we impoed over iran's nuclear program and their missile program and sanctions over north korea, and then lying about it to us. and this capitulation by the president is really inexplicable. this is not something you deal away our national security interests in a trade deal. that is inviolable, our national security. so something else must be going on. and of course, you know, you wonder when you see this reporting about china investing half a billion in a trump-related project whether the two are connected. >> and that's -- wonder is the right word there. there is no obvious direct suggestion that their president has made this u-turn in u.s. policy away from a bi

i only know the names of two chinese companies, zte and huawei, and that's because you're not supposedbuy stuff that comes from them. that's what you were told if you worked in the intel business because there's three weaknesses we have with this. one, it's the hardware. there could be components put into these phones. >> they could be little trojan horses? >> yes. they can be used for espionage. it's really two kinds with china, which we've heard the president talk about before. economic espionage, which is stealing intellectual property. then the other part, which is political and military spaunl, the traditional stuff we talk about where they drill into our defense contractors, into our defense systems. the other part is software. this all has code in it, and the code constantly has to be updated. so you could give them a baseline code and just like those updates that we see whenever we update our phone, you could then slip in code in there that turns on certain features of that phone for intel collection. the third part is what is called managed services, which is i have a contract

huawei has a router. they will sell it to an american company and they will take off huawei and put on their sticker and you have a chinese company beholden to chinese government. if they say we want you to go into that router and get the secrets of the u.s. government, they have to do it. especially in telecommunications. that is what's happening now. they embed themselves that way by white labeling. they use their american sub-contracting unit. they know nobody will allow them to build an american base, you hire an american company. that's the prime contractor. they come in as a sub-contractor to the prime contractor and they are the ones doing the work. we think we hired an american company, but the work is done which a sub-contractor controlled by z.t.e. or huawei, that's another way they are doing it. one day we're going to wake up and realize that in our own country embedded in our toiks systems, in our cable, in our routers, in our internet are a bunch of component pieces that not only leave vulner

the company under scrutiny by the united states, huawei, could go in the same direction. this is frightening for the chinese. that is a lot more complicated from the americans. we see a back and together with statements by secretary mnuchin and the president and trade representative that don't always sync up. we don't understand how to impose sanctions on. chinese in context of doing global diplomacy like the upcoming north korea summit. the fact that the administration is struggling to find its way could be a good sign. i wish the senators would jump on board and help the administration figure out the problem. neil: larry, the markets want the whole trade impasse to pass, that i can understand. anything that looks like it avoids a trade war would be created favorably like yesterday. this might be selling after that news but the president has been saying that, you know, some of the stuff we go through in the process justifies an agreement that will still call for the chinese doing more than they have to correct this trade imbalance than they have ever done before. is this

ge, huawei, those homegrown -- neil: yeah, all those guys. those guys.way that was just thrown out there and they were saying well why is the president , the trump adminitration adding this to this? it was a reminder that this can go south very fast. >> well can facebook operate in china? neil: good point. there's a lot of technological limits as well for a u.s. firm trying to operate in china, so i think that makes sense doesn't it? david: but two years before you were there, china got into the w to. it was a big fight at the time in 2001 between people who thought they're a dictatorship, a communist government we shouldn't let them into the wto, because they won't honor the agreements of fair trade that members of wto are supposed to honor. a lot of people said look we got to get them in. well once they got in, they were trading like crazy in terms of getting u.s. companies to come and share their technology, some time force inly so but they didn't give that much back, and some of the people who were against them joining the wto turned out to be right.

and contractors of the federal government from buying telecommunication equipment or services from huawei or z.t.e. because what we cannot afford is to have in our own government or in companies that are servicing the government, telecommunications equipment and services vulnerable to espionage, either corporate or national security. let me close with this. there are a lot of big issues going on in the world. and for a lot of people, including myself, this issue is pretty new. i've long been concerned about china's military expansion. they're putting all kinds of missiles on the islands in the south china sea. i have long been concerned about the human rights violations, what they've done with tibet. just so you know the sort of influence level they have, marriott corporation fired an american worker, an american living in the united states working for marriott, was fired because they liked a social media post about tibet. and so the chinese got mad. they told marriott you need to correct this. and they fired the employee. an american because he liked a social media post by mistake about

in the us, huawei has struggled to find the latest model because major american companies have abandonedressure from washington. joe miller has more from the us state of pennsylvania. in rural pennsylvania, like — like 5; finally 55555: 5 5: 5:5: 55 —:5 just 55555: 5 5: 5:5: 55 —:5 [a which 5 here 55555555 5555555555