A House Intelligence Committee report warns US firms against doing business with Huawei and ZTE, two prominent Chinese tech companies, because of the risk of espionage. The report recommends barring the two firms from any US mergers and acquisitions, citing concerns of influence by the Chinese government and its military, based on an 11 month investigation, Reuters reported.
Huawei, an employee owned company is the world’s second largest makers switches and other telecommunications equipment, behind Sweden’s Ericsson. ZTE is the world’s fifth largest.
The panel faulted both companies from failing to allay its concerns, and for providing incomplete, evasive and contradictory responses in the year long investigation.
“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 report noted that the Chinese government had the “means, opportunity and motive” to use both companies for its own purposes.
The report recommended excluding equipment or components from both companies in government contracts. The committee plans to refer these charges to the Justice Department and Department of Homeland Security.
The report claims to have received credible allegations from former Hauwei employees that suggested that Hauwei may be guilty of bribery and corruption, discriminatory behavior and copyright violation.
The unclassified version of the report included no detailed evidence of the charges.
ZTE Senior Vice President for North America Zhu Jinyun denied at a hearing before the panel last month that it would cooperate with the Chinese government on a cyber attack, according to the Washington Post. “Let me answer emphatically — no!” he said. “China’s government has never made such a request. We expect the Chinese government never to make such a request of ZTE. If such a request were made, ZTE would be bound by U.S. law.”
Both firms operate in 140 countries, with ZTE doing less than $30 million in revenue in the US last year, Hauwei’s doing $1.3 billion, with customers that include Level 3, Comcast and Cox TMI Wireless, the Washington Post reported.
Hauwei accused the commission of bias in an attempt to “impede competition and obstruct Chinese ICT companies from entering the US market,” in a statement issued after the committee’s recommendations.
“The report released by the Committee today employs many rumors and speculations to prove non-existent accusations,” the company said in the statement. “This report does not address the challenges faced by the ICT industry.”
The US isn’t the first country to have issued such concerns against Chinese companies. Last Spring, Australia blocked Huawei from a government bid on a high speed internet network due to concerns of cyber security.