UPDATE 1-India may allow Chinese telecom imports-source.

 The Indian government may allow imports of Chinese telecom equipment after security checks, a top Indian government official said, indicating a softening of India's position on an issue that has clouded ties between the two Asian powers.

Earlier this year, India had barred Indian mobile phone operators from placing orders with China's Huawei Technologies [HWT.UL] and ZTE Corp (0763.HK) (000063.SZ) because of security concerns, Indian telecom industry officials have said.

India worries that Chinese equipment may have spying technology embedded to intercept sensitive conversations and government documents that can endanger national security, highlighting government concerns over security.

A move to bar Chinese firms completely could threaten ties and affect the near $60 billion bilateral trade, some experts said.

"All Chinese companies who are clear on their ownership issues and are ready to share all details with the government might be allowed to supply equipment," a top Indian security official told Reuters on condition of anonymity.

Officially Indian policymakers have repeatedly denied any China specific bar on imports of telecom equipment, but vendors like Huawei and ZTE Corp. have been barred from supplying equipment pending a security clearance.

A senior Indian government official said that recent lobbying by Chinese firms and even some Indian mobile phone operators could have influenced the newfound flexibility on the part of the Indian government.

India's Interior (home) Secretary G.K. Pillai told Reuters that a meeting was held in the Prime Minister's Office to develop a framework for allowing telecom equipment imports, subject to the necessary security clearances.

"The new proposals do not apply just to Chinese firms but to all firms whose telecom equipment will be imported," he told Reuters on Wednesday.

A senior official in India's home ministry said under the new proposals, Indian mobile phone operators could import telecom gear from any company after clearing mandatory security checks to be certified by security audit firms such as US-based Infoguard.

Chinese firm ZTE Corp. said in May it had earlier been told that certain companies including itself had not qualified for India's security tests.

Last month, in a move that indicated a thaw, the Indian interior (home) ministry sought clarifications from Chinese telecom equipment major ZTE Corp on details of their equipment and certifications.

"We have submitted details of whatever clarification we were asked to give to the home ministry," a top ZTE official told Reuters.

"Everything has gone on a very cordial manner and we have been told that the government will soon take a decision on this issue."

Another top Indian government official told Reuters that the softening in India's position on the issue could have been dictated by a realisation of China's growing global economic and political clout.

The Indian Prime Minister Manmohan Singh, an economist, is also known to favour increased trade ties between the two Asian giants.

India accounts for about $1 billion of ZTE's (000063.SZ) annual sales, or about 10 percent of its total, while Huawei said it logged about $1.5 billion in contract sales in the market last year, about 5 percent of its total.

Indian mobile operators also stand to gain from cheaper imports of Chinese gear, as buying from western vendors may not be financially viable. (Editing by Alistair Scrutton and Sharon Lindores)

Source :- reuters.com