US companies should avoid doing business with China’s two leading technology firms because they pose a national security threat to the US, the US House of Representatives’ Intelligence Committee is warning in a report to be issued yesterday.
The panel says US regulators should block mergers and acquisitions in the US by Huawei Technologies and ZTE Corp, among the world’s leading suppliers of telecommunications gear and mobile phones.
Reflecting US concern over cyberattacks traced to China, the report also recommends that US government computer systems not include any components from the two firms because that could pose an espionage risk.
“China has the means, opportunity and motive to use telecommunications companies for malicious purposes,” the report says.
The recommendations are the result of a year-long probe, including a congressional hearing last month in which senior Chinese executives of both companies testified, and denied posing a security threat.
A US executive of one of the companies said the firm cooperated with investigators, and defended its business record.
Huawei is a “globally trusted and respected company,” Huawei vice president for external affairs William Plummer said.
Yesterday, ahead of the report’s release, a Chinese Ministry of Foreign Affairs spokesman said investment by China’s telecommunications companies in the US showed the countries have mutually beneficial relations.
“We hope the US will do more to benefit the interests of the two countries, not the opposite,” ministry spokesman Hong Lei (洪磊) said at a regular briefing.
The bipartisan report is likely to become fodder for a presidential campaign in which the candidates have been competing in their readiness to clamp down on Chinese trade violations. Republican US presidential candidate Mitt Romney, in particular, has made it a key point to get tougher on China by designating it a currency manipulator and fighting abuses.
The committee made the draft available to reporters in advance of public release, but only under the condition that they not publish stories until the broadcast on Sunday of a CBS 60 Minutes report on Huawei.
In the CBS report, the committee’s chairman, US Representative Mike Rogers, a Republican, urges US companies not to do business with Huawei.
The panel’s recommendations will likely hamper Huawei and ZTE’s ambitions to expand their business in the US. Their products are used in scores of countries, including in the West. Both deny being influenced by Beijing.
“The investigation concludes that the risks associated with Huawei’s and ZTE’s provision of equipment to US critical infrastructure could undermine core US national-security interests,” the report says.
The report says the committee received information from industry experts and current and former Huawei employees suggesting that Huawei, in particular, may be violating US laws. It says that the committee will refer the allegations to the US government for further review and possible investigation. The report mentions allegations of immigration violations, bribery and corruption, and of a “pattern and practice” of Huawei using pirated software in its US facilities.