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
    +2

    Comment number 270.

    This isn't a political distraction. China will act in its own interests to assert its security efforts, as the US will. China is not an innocent trading partner with the US. In 2008, China produced USB drives with preinstalled viruses that were the US military used (Indian Navy too). This gave the Chinese access to otherwise highly secure military networks. This sounds like reasonable consequence.

  • rate this
    -1

    Comment number 269.

    Trade protectionism. Protectionism. Isolation. Isolation. Protectionism.
    America is, indeed, becoming an island in a world with large continents. America only accounts for 5% of the global population.
    China, like America, uses other peoples' technology while developing its own. It is increasingly innovative and worldly.

  • rate this
    +1

    Comment number 268.

    reply to: 253. Weihan AN EDITORS' PICK
    "And now, when China is ready to overtake the US in every niche of research and product?"

    This is about security, how can BBC not get this, and the above statement is untrue:
    http://en.wikipedia.org/wiki/List_of_countries_by_research_and_development_spending
    http://en.wikipedia.org/wiki/List_of_countries_by_patents

  • rate this
    +2

    Comment number 267.

    If the USA feels these Chinese telecoms companies are a security threat, that's their business.

  • rate this
    +1

    Comment number 266.

    For high tech companies, Huawei & ZTE are being remarkably stupid, its America, just hire a top lobbying firm & bribe a few congressmen/senators - all the problems will go away and they might even win a few Pentagon contracts as a by product.
    Small tip to anyone doing business in the US, buy a few politicians its cheapest/best investment money can buy

  • rate this
    +2

    Comment number 265.

    reply to: 253. Weihan AN EDITORS' PICK
    "Why is it China's fault if the USA is no longer capable of producing high-tech telecommunications hardware?"
    The issue isn't about US vendors or innovation, it's about limiting China's political power through their commercial strategies. The competing major vendors are European owned, LME, ALU, NSN. The BBC Editors don't understand this either.

  • rate this
    +2

    Comment number 264.

    Its a well known fact that the majority of counterfeit goods come from China and yet all these big companies and governments STILL expect China to produce their goods, WHY? Is it really just to do with money?
    A country that will never change, doesn't give a damn about its people and yet we trade if you could call it that, at the expense of our own manufacturing and workforce.

  • rate this
    +2

    Comment number 263.

    i use 3g dongles for internet access,have used dongles made by various companies,but the 2 dongles i bought that were made by huawei both caused the firewall to tell me it had quarantined a worm virus when i used them.it also tried to change registry settings and a host of other settings.is this normal?

  • rate this
    0

    Comment number 262.

    For a country that is purportedly the champion of capitalism, the US don't half like to impede free markets. People are so blinded by the fact that these are foreign companies, that they have selectively become mis-informed. In the UK Huawei has set up a centre to test their equipment by the likes of GCHQ. This has nothing to do with security, but has everything to do with protectionism.

  • Comment number 261.

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

  • rate this
    0

    Comment number 260.

    @ 257 Ha-ha, there are always some sellouts.. However you pick up that yuan or dollar coated with soya sauce, go on or I will and I know exactly where I'll shove it. U won't like it, lol. Some in China also think that by doing trade with Australia, that Australia should not allow U.S. soldiers in Australia or that Australia will ignore broadband security or reject the U.S., well this is crazy !!!

  • rate this
    0

    Comment number 259.

    Now we have Romney making war threats whilst making a major foreign relations speeches, next he will politicize the China 4G Network......

    OOps
    Already Done

    I guess our President to be want to go to war with everyone!

  • Comment number 258.

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

  • rate this
    +1

    Comment number 257.

    "243. Commonsense10a
    41 MINUTES AGO
    This is ridiculous, westerners will never reject democracy or western ways because of some trade. We can't and won't be bought. Never !!

    ...ooOooh look! a bright shiny coin!! *bends over to pick it up (kowtows).

  • rate this
    -1

    Comment number 256.

    @246

    How exactly is China is going to switch off UK Power Networks, UK power stations, in the UK..and keep them switched off?.. face it, the worst they can do is put your tariff up.. and you have the option to switch to another power company.

    ..by the way does Menwith Hill use Chinese made tech? -
    http://www.guardian.co.uk/world/2012/mar/01/menwith-hill-eavesdropping-base-expansion

  • rate this
    +1

    Comment number 255.

    @253 There is more than just business at stake, there are real concerns about security and control and crime and monitoring and warfare obviously.
    All countries have a right to and expect their politicians and governments to protect and create local jobs and industry and prosperity. China is cheating by copying, slave labour, pollution, product dumping and low currency.

  • rate this
    -1

    Comment number 254.

    the last few lines quoted from huawei's vp capture the background story of this farcical game. the US may get its way to-day, but at the cost of a degenerating trust in its "justice": US claims of international security threats have been shouted a hundredfold in the last decade and echoed empty, and someday, when maybe fears are warranted, won't muster allies around its banner.

  • rate this
    0

    Comment number 253.

    Why is it China's fault if the USA is no longer capable of producing high-tech telecommunications hardware? This is the natural outcome of globalization - a process pushed and promoted foremost by the USA itself! And now, when China is ready to overtake the US in every niche of research and production, the Americans are suddenly finding any and every excuse to deny China access to US markets.

  • rate this
    0

    Comment number 252.

    So far globalization befitted big companies & its executives in 1st world countries. It also took huge toll on 3rd world countries, China, by suppressing talents with independent thinking & call for open govt while promoting mediocrity & corrupt regimes that collude with big businesses.
    Stealing of technology, not developing own market & talent r few consequences of globalization in present form.

  • rate this
    -2

    Comment number 251.

    @Frederik, post #248:

    "How quickly we forget that China is a communist country [...]. China has shown time and again it will not play by the rules."

    And the US and UK governments do?! The US particularly displays open contemptfor the rule of international law. Both the US and UK flagrantly violated UN articles when they conducted their massacre of civilians in Iraq. Where have you been?

 

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