Huawei and ZTE pose security threat, warns US panel

 
Charles Ding of Huawei Technologies and Zhu Jinyun of ZTE Officials from Huawei and ZTE have been questioned by US lawmakers as part of the probe

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Chinese telecom firms Huawei and ZTE pose a security threat to the US, a congressional panel has warned after an investigation into the two companies.

The two firms should be barred from any US mergers and acquisitions, according to a House Intelligence Committee report.

The panel says the firms failed to allay fears about their association with China's government and military.

Huawei and ZTE denied the accusations in front of the panel in September.

On Monday ZTE issued a statement insisting its equipment met all US standards and posed no threat.

'National security' fear

"ZTE has set an unprecedented standard for co-operation by any Chinese company with a congressional investigation," China's Xinhua news agency quoted the firm as saying.

Start Quote

Huawei and ZTE cannot be trusted”

End Quote House Intelligence report

Huawei's vice-president, William Plummer, said the latest accusations were "dangerous political distractions".

"Purporting that Huawei is somehow uniquely vulnerable to cyber mischief ignores technical and commercial realities, recklessly threatens American jobs and innovation, does nothing to protect national security."

While the House Intelligence report stopped short of calling for a boycott of the firms' mobile phone products, it was highly critical of the two companies.

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

"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems."

The panel said their investigation had received credible allegations from current and former Huawei employees of bribery and corruption, discriminatory behaviour and copyright infringement.

Republican committee chairman Mike Rogers said they had passed on information to the FBI to investigate the allegations.

"We've come to the conclusion, unfortunately, they are not private entities," Mr Rogers said on Monday.

On Sunday, Mr Rogers delivered a blunt verdict to the 60 Minutes programme on US network CBS.

"If I were an American company today... and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America," he said.

Among the report's recommendations were to exclude any Huawei or ZTE equipment or component parts from being used by government contractors, as well both companies becoming "more transparent and responsive to US legal obligations".

China's Foreign Ministry urged the US to "set aside prejudices" regarding the two firms.

"Chinese telecoms companies have been developing their international business based on market economy principles," ministry spokesman Hong Lei said.

"Their investment in the United States embodies the mutually beneficial nature of Sino-American economic and trade relations."

Espionage fears

Huawei was started by Ren Zhengfei, a former member of the People's Liberation Army, in 1987.

House Intelligence Committee Chairman Mike Rogers and Representative Dutch Ruppersberger hold a news conference 8 October 2012 "We've come to the conclusion, unfortunately, they are not private entities," Mr Rogers (left) said

As the firm has grown to become one of the largest global players in the sector, fears about its ties with the Chinese military have frequently surfaced.

There have been concerns and allegations that it was helping China gather information on foreign states and companies, charges that the firm has denied.

Last year, its purchase of American computer company 3Leaf systems, was rejected by a US security panel.

Earlier this year, it along with ZTE, faced allegations that some of their equipment had been installed with codes to relay sensitive information back to China.

Senior executives from the two companies denied those allegations when they appeared before US lawmakers in September.

ZTE is also facing accusations it sold US telecoms equipment to Iran, in breach of US sanctions. Telecoms giant Cisco on Monday ended its relationship with ZTE, Reuters reported, after its equipment was included in the Tehran deal.

Political distraction?

This latest report comes in the midst of a US presidential campaign in which China has become a hot topic.

Both President Barack Obama and his Republican challenger Mitt Romney have pledged to increase the pressure on Beijing on issues ranging from China's currency policy to state subsidies for Chinese firms.

Earlier this month, Mr Obama signed an order blocking a deal by a Chinese firm, Ralls Corp, to acquire four wind farm projects near a US naval facility in Oregon.

It was the first foreign investment to be blocked in the US for 22 years.

The Chinese firm has since sued Mr Obama, alleging the US government overstepped its authority.

 

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  • rate this
    -6

    Comment number 190.

    Either way a two years or so down the line ZTE and Huawei will probably be releasing tech that surpasses LTE. I want to see Verizon and AT&T rejecting them by then. The US caters for its people and tries to keep up with trends, that's always been the case. And that's why Chinese telecom companies will always have a way into the heart of US telecom providers.

  • rate this
    -1

    Comment number 189.

    China currently has an enormous 'achilles heel'..it does not have an adequate home market, the majority of its real economy depends on exports..to markets with gargantuan bad debt and insufficient liquidity (with globalised speculators betting against those markets).. unless the debt mountain is resolved efficiently and sustainably, the economic forecast globally is mostly brown, smelly stuff...

  • rate this
    -1

    Comment number 188.

    Ironically, one of the biggest potential blows to the US economy in recent times is China's continual reluctance to embrace the Windows operating system. Initially this was on grounds that it could not be trusted (they suspected that it had a backdoor to grant the CIA access). Perhaps the US Government should consider the virtues of international cooperation over incessant economic warfare.

  • Comment number 187.

    All this user's posts have been removed.Why?

  • rate this
    0

    Comment number 186.

    America are setting a dangerous precedence by this, and unless they have proof, this sort of suspicion could harm international trade. It's the same sort of propaganda game North Korea would play for not allowing a McDonalds or KFC franchising into their country, because these foods are perceived to be poisonous.

  • rate this
    -3

    Comment number 185.

    USA just need to admit it they also practice protectionism!

    When USA cannot compete, they will use the same lame excuse like national security to prevent it happen!

    Remember Members of the US Congress have objected to the takeover by DP World (DPW) on P&O deal? It was the same lame excuse!

  • rate this
    +3

    Comment number 184.

    At 163. Although I don't agree with the US stance and feel they should be the bigger person, China have been unwilling to play fair for years. For example, Chinese companies can not be owned by a foreign company, plus the government allows Chinese companies to copy other companies designs. Just look at Chinese cars who are often very similar a BMW, yet the government says it's ok

  • rate this
    -7

    Comment number 183.

    The only thing the Chinese people are culpable of is creating technology that revolutionizes the tech world. The US don't mind Intel and AMD bringing their chips and other materials from China but they worry about telecoms. But if the US wants to shoot off their foot and anger China, they should go right ahead. I'll be watching the interesting turn of event. China can be scary when unhappy.

  • rate this
    -3

    Comment number 182.

    The U.S.A carries out espionage activities in many countries and through different organisations...and everybody says its politics. Now the 'Red Dragon' 'is doing' the same on US soil, and the US becomes VERY worried. what a contradiction!

  • rate this
    +3

    Comment number 181.

    Business ethics is an oxymoron in China. No one can trust their motives as long as the PRC government is involved. That being said, there are 2 halves to the equipment in question, the hardware and the software. The software is where the malicious code would reside. There is a business opportunity for someone to remove the chinese software and replace it with more reliable code.

  • rate this
    -5

    Comment number 180.

    My conclusion, ergo, is that the biggest threat to Global security is American foreign policy. That's not to say that the Chinese Government is benevolent, for it has done its share of heinous crimes against humanity too. But, recalling the 'Evil Empire', 'The Axis of Evil', the expanding def. of 'Terrorist', 'Weapons of mass destruction', etc., etc. I choose to doubt the boy who cries 'wolf!'.

  • rate this
    0

    Comment number 179.

    156.
    disgusted

    116. ballpark10
    You have a very good point there.
    China owns so much US government debt that, it they start dumping large chunks of that. it would be apocalypse for the US (and for themselves).

    Especially if they sold the debt on to Iran, Yemen or/and North Korea.

  • rate this
    -6

    Comment number 178.

    "A Security Threat To US?" What a nonsense warning? It is just a political propaganda. United States itself is the number one security threat to the whole World.

  • rate this
    +2

    Comment number 177.

    So, what is wrong with this issue being politically motivated, the business owners can be mad at U$A for standing up & saying NO
    any US business that puts profits over National Security is blinded by money & can move to china as far as I am concerned
    Denying that the codes were in there is not good enough for me
    I am well aware of how corparations will lie for profits
    Big Corps do it every day

  • rate this
    -1

    Comment number 176.

    In WW2 the US was reluctant to help Britain, since it allegedly wanted the Russian and British superpowers to grind down against Germany. Loss of shipping with Europe allegedly forced their hand economically. Not content, they have targeted nation after nation ever since: warring over oil and reckless sanctions to grind nations down. Now they target Iran and China with computer viruses and more.

  • rate this
    +12

    Comment number 175.

    On this one I think the yanks are spot on, I wouldn't trust either of them, given their sinister links to the chinese state.

    Only the stupid British Government would allow one of them to be the sole supplier for BT's renewal of their core network. A decision that destroyed British jobs, and puts our security at risk. And then the supplier delivered the new network late..U couldn't make it up!

  • rate this
    -2

    Comment number 174.

    Some of the talk here is just silly. "Because the US does it, then China should be able to do it, too." Ask yourself one simple question. Do you want either one to gain the upper hand or are we all better off when both know that the theory of mutually assured destruction exists?

  • rate this
    -1

    Comment number 173.

    i suppose the real point of debate is
    do they need us
    more than we need them
    if the they need us then they should treat us ok
    but if they do not need us then they must be trying to get rid of us
    if need us do they need us all or just a few chosen ones
    i get the feeling they need just a few chosen ones
    the rest of us a surplus to there requirement
    so it is
    MARKET PRICE DISCOVERY RULES OK

  • rate this
    +6

    Comment number 172.

    This is a wake up call for Cisco
    They need to get ahead of the curve and get a better, faster and more secure 6G network done!
    Simple............we wish

    But that is what we need. Our own 6G and the Armed Services should put some of their military money into the pot as well. Security is very important.

    I wish U$A was the best, but we are lagging behind

  • rate this
    -1

    Comment number 171.

    Irony = Tea Party USA hating on the free market

    @156
    I'm not surprised the Chinese are boosting their investment in Gold..Western economies are in the toilet and bond purchases by the Chinese simply prop up their overseas markets for exports..as you point out if we go bust, so do they.
    Chicago School Economics is in effect a massive Ponzi scheme, currently raddled with bad debt and stagflation

 

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