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 250.

    Every country has to be careful with it's national security. If you are not careful then some possible enemies call you idiots and stupid, if you are careful then they say you are just trying to stop their business growing or don't like competition. China claims everything is a domestic issue but how can islands in international waters and a foreign country called japan be a domestic issue ?

  • rate this
    0

    Comment number 249.

    @244

    ..sooo, we shouldn't trust a government that price dumps products, eh?

    'U.S. corn is typically dumped in the Mexican market at up to 30% below
    the cost of production. In addition, corn buyers in Mexico are attracted
    to imported U.S. corn by the very favorable loan rates available to them
    through U.S. export agencies..'
    http://www.organicconsumers.org/chiapas/nafta040504.cfm

  • rate this
    +2

    Comment number 248.

    How quickly we forget that China is a communist country and the communist government denies its own people basic civil liberties and free elections. China has shown time and again it will not play by the rules.

  • rate this
    +7

    Comment number 247.

    It's well accepted fact that countries like China & India can NOT develop almost any novel technology on its own, even in fields like space & nuclear research.
    US govt & businesses must do more to minimize speared of US technologies by investing on manufacturing at home. Govt agencies must force public funded research Univ & institutes to emphasize on innovation-invention than just data cranking.

  • rate this
    +4

    Comment number 246.

    Yes, I know who EDF are, and quite frankly, as they do in France, I would not allow ANY(as I said) foreign company to have a controlling stake in an essential utility. Just for factual reference EDF sold EDF Energy Networks to the Chinese companies in 2010 who then changed the name to UK Power Networks.

    240.
    Lamna nasus
    @232
    EDF stands for Électricité de France S.A.. you were saying?

  • rate this
    +3

    Comment number 245.

    People familiar with this case and those who work in the industry know that the Huawei and ZTE use government guided practices to weaken competitors and gain access to critical telecom networks for long-term strategic advantage. The proof is in other countries and I'm glad we are blocking them in the US. China is not interested in share holder value, they use corporations to advance influence.

  • rate this
    +4

    Comment number 244.

    It is generally understood by many people that worked in the Telecomms product/solution industry in the 1990 and early 200Os that Huawei developed and grew by ripping off the designs (reverse engineering) of USA & European developed technology. They also pursued a strategy of price dumping on products such as ADSL access multiplexers in Markets such as South America. How can they be trusted

  • rate this
    0

    Comment number 243.

    Some silly chinese people and politicians think that money is all that matters in life. Some chinese mistakenly think that if they do a lot of trade with a country then that country will bend over and change their allegiance to China's values and beliefs. This is ridiculous, westerners will never reject democracy or western ways because of some trade. We can't and won't be bought. Never !!

  • rate this
    +2

    Comment number 242.

    @237
    Western corporations are happy to pander to the authoritarian Chinese government and be complicit in spying on Chinese citizens to make money.. Western corporations are also happy to accept lower standards of pay and conditions for Chinese workers in pursuit of greater profits for their shareholders.. and Western consumers like cheap goods.. so much for the moral high ground...

  • rate this
    +8

    Comment number 241.

    seajazz, This is news because it's a developing story of interest to all Americans.

    It's bad enough that our own country spies on innocent citizens here, thanks to the Patriot Act, without encouraging other countries to do the same.

    Nothing against the Chinese people, it's just the government.

    And long live Tibet.

  • rate this
    0

    Comment number 240.

    @232
    EDF stands for Électricité de France S.A.. you were saying?

    @227
    ..because the USA has this 'special relationship' with British industry, like Dubyah's Section 201 steel tariff in 2002, eh?
    Buy back the US government bonds and use US tech, designed and manufactured in the US, for military and government purposes..oh wait.. taxes might go up, no way the Tea Party are going to vote for that

  • rate this
    -1

    Comment number 239.

    TRUST NO ONE.

    I saw this on tv so it must be true.

    Not the Chinese government, nor the US government nor - let's get real - the UK government.

    Duplicitious, all of them.

    And when will we learn that the 'national interest' is far from being the 'people's interest'? Sometimes they coincide, but not often. And let's also remember that actions in the 'national interest' are often wrong, morally.

  • rate this
    +6

    Comment number 238.

    Be careful with the computer drivers that you download and update for your video cards, motherboards and other hardware and software. If they are drivers from China how do we in the west know that they are not loaded with viruses and spyware ? Of course all countries need to and want to be friendly and live in peace but of course there are still security concerns and common sense.

  • rate this
    +7

    Comment number 237.

    Not too long ago China barred US and European telecom equipment vendors from entering the market unless key code was released to the Chinese central government, companies like Cisco, Ericsson and Siemens had a very tough time getting product to market. Even companies like Intel have had a hard time in maintaining a solid market foundation and control of intellectual property which is copied.

  • rate this
    +2

    Comment number 236.

    It isn't just the telecoms that are suspect. A couple of years ago in Indiana, a Chinese scientist at one of the agricultural research facilities was caught sending industrial secrets back to China. This was one of hundreds such instances across the country in various industries.

  • rate this
    +4

    Comment number 235.

    Lots of CCP armies here. Your lack of knowledge of the English language gives it away. Do you guys need an English teacher in China. If so, call me....maybe.

  • rate this
    +3

    Comment number 234.

    Wonder if politicians in the UK will sit up and listen to this, pretty sure huawei is involved with our GCHQ. then again im sure if the backhanders keep coming they couldnt care less.

  • rate this
    0

    Comment number 233.

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

    to determine that, all the US had to do was check to see what the CIA/FBI and Gov are doing with their "telecommunications companies". Certainly I hope they do not expect us to believe they do not use Cisco for the same purposes?

  • rate this
    +6

    Comment number 232.

    Just worth noting that UK Power Networks which provide electricity distribution and infrastructure to East, South East England and London is owned by three Chinese companies. Apparently they all operate with propriety, but is it not risky to allow ownership of a major essential utility company to any foreign owned organization? Who could give the order to "turn out the lights"?

  • rate this
    +4

    Comment number 231.

    Apparently, our telecommunications industries dropped the ball and don't even manufacture the kind of equipment STE and Huawei do. What a loss of face! And a security risk!

    If our telecom industries would put as much money into research and development as they do giving their CEOs incredibly ludicrous salaries and perks, we'd be better off. Funny commercials just don't cut it.

 

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