In May, Commerce officials put Huawei on an export blacklist.

Photo: hannibal hanschke/Reuters

WASHINGTON—The U.S. Senate approved legislation that would provide $1 billion for rural telecom carriers to replace equipment made by China’s Huawei Technologies Co. in their networks.

House lawmakers passed a similar bill in December. Thursday’s vote in the Senate advances the proposal to President Trump, who has the power to sign it into law.

If signed, the bill will provide funds for about 40 rural carriers that use Huawei gear, which the U.S. says could be used by Beijing to spy on the communications that flow through its networks. Huawei, the world’s largest maker of telecom equipment and the No. 2 smartphone vendor, has disputed those assertions.

Huawei hardware makes up less than 1% of equipment used by U.S. telecom networks, but some of its gear has made its way into the networks of dozens of rural U.S. cellphone carriers and cable operators.

David Stehlin, chief executive of the Telecommunications Industry Association, called the Senate passage “a critical step in securing our network and ensuring the integrity of the telecommunications supply chain as we usher in the 5G era.”

“By passing the act, Congress is also sending a clear signal to the global industry that the U.S. will continue to lead the way on 5G security,” he said.

A Huawei representative criticized the legislation, saying in a statement that it is “considerably underfunded, would take longer than anticipated and could put at risk some of our customers.”

“This legislation will simply reduce the ability of broadband providers to provide the most secure network equipment and in turn hurt local consumers and businesses,” the statement said.

In May, Commerce Department officials put Huawei on an export blacklist—a move that cut the equipment maker off from some U.S. suppliers and created uncertainty for rural carriers that use its equipment.

After the ban raised questions about whether U.S. customers using Huawei equipment could receive service and support, or even communicate with the company, U.S. officials granted a license that enabled transactions to continue between a narrow slice of U.S. suppliers that send parts to Huawei and its division that works with rural carriers.

Those continued transactions exposed Mr. Trump to criticism from national security experts who have pushed his administration to crack down on the Chinese company.

The proposal in Congress, which would also allow that federal money to replace ZTE Corp. equipment, could also help Mr. Trump win over rural voters in an election year.

Write to Katy Stech Ferek at katherine.stech@wsj.com

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