US House Intelligence Report on Huawei & ZTE

Lawmakers are warning U.S. companies not to do business with two of the world’s largest telecommunications equipment makers. The U.S. House of Representatives Intelligence Committee released a report Monday after an 11-month investigation about the business practices of Huawei Technologies and ZTE Corp, Chinese firms that develop and sell telecom communications equipment like routers, handsets and switches. The report recommends that Huawei and ZTE be excluded from expanding their businesses in the U.S. because of cyber espionage risk and connections to the Chinese government.
Committee members said neither Huawei nor ZTE provided ample documents or detailed information to “ameliorate the committee’s concerns” about their formal relationships and interaction with Chinese authorities. The investigation determined that Huawei and ZTE present risks to critical U.S. infrastructure that “could undermine core U.S. national-security interests” and therefore the U.S. “should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies.”

“China has the means, opportunity and motive to use telecommunications companies for malicious purposes, ” the report said. “Industry giants like Huawei and ZTE provide a wealth of opportunities for Chinese intelligence agencies to insert malicious hardware or software implants into critical telecommunications components and systems. Even if the company’s leadership refused such a request, Chinese intelligence services need only recruit working-level technicians or managers in these companies. Further, it appears that under Chinese law, ZTE and Huawei would be obligated to cooperate with any request by the Chinese government to use their systems or access them for malicious purposes under the guise of state security.”

Huawei and ZTE executives have denied charges that Chinese government officials have influenced business deals or meddled in daily operations.

“Baseless suggestions, otherwise or purporting that Huawei is somehow uniquely vulnerable to cyber mischief ignore technical and commercial realities, recklessly threaten American jobs and innovation, do nothing to protect national security, and should be exposed as dangerous political distractions from legitimate public-private initiatives to address what are global and industry-wide cyber challengers,” Huawei spokesperson William Plummer told Reuters.

China’s Foreign Ministry Spokesman Hong Lei responded to the accusations in an interview with BBC News. “Chinese telecoms companies have been developing their international business based on market economy principles,” Lei said.
The U.S. government has become increasingly concerned over Chinese influence in U.S. markets and both President Barack Obama and Republican presidential nominee Mitt Romney have vowed to take a tougher stance against Beijing on currency and trade policies. The Obama administration recently rejected a bid by Chinese firm Ralls Corp. to build four wind farm projects near an Oregon-based naval facility, the first foreign investment to be barred in the U.S. in 22 years.