U.S. panel warns against doing business with China’s Huawei, ZTE

PanARMENIAN.Net - American companies should avoid doing business with China's two leading technology firms because they pose a national security threat to the United States, the House Intelligence Committee is warning in a report to be issued Monday, Oct 8.

According to The Associated Press, the panel says U.S. regulators should block mergers and acquisitions in this country by Huawei Technologies Ltd. and ZTE Corp, among the world's leading suppliers of telecommunications gear and mobile phones.

Reflecting U.S. concern over cyber-attacks traced to China, the report also recommends that U.S. government computer systems not include any components from the two firms because that could pose an espionage risk.

"China has the means, opportunity, and motive to use telecommunications companies for malicious purposes," the report says.

The recommendations are the result of a yearlong probe, including a congressional hearing last month in which senior Chinese executives of both companies testified, and denied posing a security threat.

A U.S. executive of one of the companies said the firm cooperated with investigators, and defended its business record. Huawei is a "globally trusted and respected company," said William Plummer, vice president for external affairs.

On Monday, ahead of the report's release, a Chinese foreign ministry spokesman said investment by China's telecommunications companies in the United States showed the countries have mutually beneficial relations.

"We hope the U.S. will do more to benefit the interests of the two countries, not the opposite," said spokesman Hong Lei at a regular briefing.

The panel's recommendations will likely hamper Huawei and ZTE's ambitions to expand their business in America. Their products are used in scores of countries, including in the West. Both deny being influenced by China's communist government.

"The investigation concludes that the risks associated with Huawei's and ZTE's provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests," the report says, according to the AP.

The report says the committee received information from industry experts and current and former Huawei employees suggesting that Huawei, in particular, may be violating U.S. laws. It says that the committee will refer the allegations to the U.S. government for further review and possible investigation. The report mentions allegations of immigration violations, bribery and corruption, and of a "pattern and practice" of Huawei using pirated software in its U.S. facilities.

Huawei is a private company founded by a former Chinese military engineer, and has grown rapidly to become the world's second largest supplier of telecommunications network gear, operating in more than 140 countries. ZTE Corp is the world's fourth largest mobile phone manufacturer, with 90,000 employees worldwide. While their business in selling mobile devices has grown in the U.S., espionage fears have limited the companies from moving into network infrastructure.

The report says the companies failed to provide responsive answers about their relationships and support by the Chinese government, and detailed information about their operations in the U.S. It says Huawei, in particular, failed to provide thorough information, including on its corporate structure, history, financial arrangements and management.

The intelligence panel says ZTE refused to provide any documents on its activities in Iran, but did provide a list of 19 individuals who serve on the Chinese Communist Party committee within the company.