U.S. warns about Chinese bid for undersea cable

The U.S. has taken its campaign against Chinese telecoms underwater.

Sources have exclusively told Reuters that Washington has warned Pacific island nations against accepting a cut-price offer to build an undersea internet cable in the Pacific from China's Huawei Marine.

It's a nearly 73 million dollar project, bankrolled in part by the World Bank, designed to give an internet boost to Nauru, Micronesia and Kiribati.

The sources say Washington flagged its concerns to Micronesia, a move that sparked an angry response from China's foreign ministry.

"Relevant remarks made by the U.S. are purely a smear of Chinese firms. It is an excuse fabricated for unreasonably suppressing Chinese high-tech firms," China's Foreign Ministry Spokesman Wang Wenbin said.

Another of countries involved, Nauru, has also signalled concern.

Although the third, Kiribati, has taken a more favourable approach after establishing formal diplomatic ties with China last year.

Chinese telecoms companies have come under scrutiny abroad, especially giant Huawei Technologies

U.S. President Donald Trump's administration has pressured allies to squeeze the company out of future infrastructure projects.

Huawei actually divested Huawei Marine earlier this year

But it's still a Chinese company, and required by law to cooperate with Beijing's intelligence and security services.

The cable project could be especially risky for Washington.

According to plans, it would connect to another undersea cable used primarily by the U.S. government which lands at the U.S. territory of Guam, an important base for the military.

Huawei Marine's bid came in at more than 20% below rivals.

And that low cost puts it in a good position to win.

But the project is now at an impasse, according to the sources, as the countries and agencies involved fail to agree on the best way forward.