Canada says it has invoked a "national security exception" that could exclude China's Huawei Technologies from a role in helping build its new super secure government network.
Ottawa announced the move after the US House Intelligence Committee on Monday warned in Washington that equipment supplied by two Chinese firms, Huawei Technologies and ZTE Inc, could be used for spying.
Australia has already barred Huawei from competing for National Broadband Network contracts.
"The Government is going to be choosing carefully in the building of this network and it has invoked a national security exception," said Andrew MacDougall, spokesman for Prime Minister Stephen Harper.
Ottawa invoked its "national security exception" to trade agreements in the building of its massive data and telecommunications network.
Huawei is already providing high-speed networks for private Canadian firms Bell Canada, Telus, SaskTel and Wind Mobile, but Canadian authorities remain wary about the role it might play as the country rebuilds networks damaged by cyber attacks in 2010.
Huawei has rejected the US congressional report as "an exercise in China-bashing.
But a former top intelligence official with Canada's spy agency, Ray Boisvert said in an interview with the Canadian Broadcasting Corporation that he agrees with the risks outlined by Washington.
Shared Services Canada - the ministry tasked with building the government's new network - also issued a statement saying it "takes cyber security seriously and operates on the advice of security experts."
"Our government has put in place a cyber security strategy designed to defend against electronic threats, hacking and cyber espionage," the ministry said.
The move affects the procurement of consolidated email, telecommunications and data centre infrastructure, systems and services for the government.