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

    Comment number 210.

    "China has the means, opportunity and motive to use telecommunications companies for malicious purposes," the report says.
    So does America? What of Boeing, Lockheed Martin (who does the UK census)? Even Microsoft, Cisco... all US companies, supplying critical security tech to other nations... all have US military links and influences. US just don't want Chines companies to succeed.

  • rate this

    Comment number 209.

    Politics aside, this is definitely a very real threat. The problem is that hacking that originates from China's hackers are generally traced back to IP addresses that are Chinese government institutions and PLA "owned" servers. With power grids & vital communications providing essential & services, it would be crazy to allow a potential adversary control and access thereof. Time to draw a line...

  • rate this

    Comment number 208.

    It's all well saying "stop buying goods from China" and "US companies should be making their products in the US", but they easily forgot how little we pay for these goods. Just imagine how expensive your ipad would be if Apple built it in the US or even simple electronic devices which we use everyday. Are people willing to receive lower wages? I doubt it so the only option is to increase the RRP.

  • rate this

    Comment number 207.

    OF COURSE these companies shouldn't own anything. They are propped up with direct Chinese government money, isn't that a WTO violation? This company managed to put NORTEL out of business by using cyber crimes initiated from China condoned by the government, considering they see all that happens.

  • rate this

    Comment number 206.

    So why do U.S. companies keep dealing with these companies.Its time to cut off their cash flow and stop dealing with them.
    If it waddles like a duck, quacks like a duck its not a rooster people.

  • rate this

    Comment number 205.

    We could stop buying Chinese goods and start buying our own..but Protectionism helped to create the Great Depression after the Wall Street Crash.. Catch 22...

    No surprise China dislikes foreign corporations..the old Chinese Empire was plundered by foreign companies (many British and American)

    Bell was a monopoly..

    Pardonez-moi..EDF would be better at keeping "our secrets"?

  • rate this

    Comment number 204.

    @TheLeecher, it is quite common knowledge in the field that Huawei and ZTE have been constantly copying their stuff off Ericsson, NSN etc since time immemorial. Their R&D cost is offset much by way of imitation and value-adding innovation which certainly doesn't amount to anything revolutionary. That's how they have been able to undercut competitors and gain market share for the past decade.

  • rate this

    Comment number 203.

    China did not jump 70 years of technology in 20 years by their shear brain power. They are the world's number 1 IT hackers. They attack more US and other countries intellectual property through cyber theft than all the other governments put together in the world. This is not political as much as it is reality. I work in IT and know. Some bards here spin fables. Be aware of a thief or be a fool.

  • rate this

    Comment number 202.

    China is one those countries who play by no rules, where everything is permitted. Nobody shoule be surprised and if they are, they are idiots.

  • rate this

    Comment number 201.

    How is this news if it hasn't happened yet?

  • rate this

    Comment number 200.

    The two companies in question are not merely Cisco-like in that they are involved in a certain scope of telecom equipment making ie router and switches, they are also strong players in mobile telecoms,transmission,core networks, antennas etc. In short they are end-to-end players. Their proper equivalents are Ericsson, Nokia Siemens and Alcatel Lucent. And imo the US is wise to keep them out.

  • rate this

    Comment number 199.

    Chinese technology companies have in the past provided tainted remanufactured routers and firewalls to the DOD with backdoors installed in chinese factories. The risk here is that the chinese telecoms will repeat what they have shown they will do again and again which is to kowtow to their government and install backdoors for the theft of classified information and trade secrets.

  • rate this

    Comment number 198.

    When world is open market,all countries have to work harder to prove.U.S. and rest of the western world want to live beyond means by getting more profit,that won't work.No one should worry about other country.All are trying to prove and progress.

  • rate this

    Comment number 197.


    I'm curious, you think they'd have a year after doing that? I'm thinking they'd have 24 hours to reverse their policy of face what has always been the US's foreign policy: blow em up, question the logic a decade later.

  • rate this

    Comment number 196.

    @46 the-moog

    I'm not the one being disingenuous. Every one of your posts is a one-sided criticism to make it appear that China is the only country to ever do something wrong. WMDs in Iraq is not ancient history, nor is Guantanamo water-boarding. Don't act like the West is pure and devoid of sin; nor should you think that because the West takes the moral high-ground NOW, that makes them better.

  • Comment number 195.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 194.

    185 Andy - its about time - I am tired of seeing my country thrown under the bus because of lame policies created by ivory tower college professors. US government should not have broken up BELL Telephone period.

  • rate this

    Comment number 193.

    I think I heard that the UK is to allow the SAME company from China to have a part in our telecoms!

    Plus China is going to build our NEW nuclear power stations.

    OH GREAT! There goes our security & secrets!

  • rate this

    Comment number 192.

    USA dropping bombs killing thousands and thousands innocent civilians in the Iraq/Afghanistan war....and at the same time they want to criticize China human right?

    USA human rights is worst than China. Killing thousands and thousands of innocent people in the name of war!!!

  • Comment number 191.

    This comment was removed because the moderators found it broke the house rules. Explain.


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