A congressional investigation has labeled Chinese telecommunications equipment firms Huawei and ZTE as threats to national security and will advise government departments and US companies to steer clear of their products, The Wall Street Journal reports.
The House Intelligence committee report, which sums up a year-long investigation, is set to be published on Monday and will reportedly contain recommendations that Congress prevent acquisitions or mergers between the two companies and US firms, according to the Journal.
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Both companies maintain that they have been highly cooperative with the investigation. In a statement on Monday, ZTE denied allegations that it is under the government’s thumb.
“ZTE should not be a focus of this investigation to the exclusion of the much larger Western vendors,” the company wrote in a letter to the committee, as noted by Reuters.
Huawei spokesman William Plummer told the Journal that the concerns are “baseless”:
“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,” he said.
However, Rep. Mike Rogers (R.-Mich.), chair of the committee, said, “We simply cannot trust such vital systems to companies with known ties to the Chinese state, a country that is the largest perpetrator of cyberespionage against the US.”
While the report doesn’t contain direct proof that equipment from Huawei or ZTE is vulnerable to Chinese spying, it does note that some US firms have reported “odd or alerting incidents” using their products. However, one of the committee’s chief concerns is that the Chinese government could demand sensitive information from either of the two.
Huawei is the world’s second-largest telecom equipment maker, behind only Ericsson, and it is said to be looking into the possibility of an IPO. Sources say that it has contacted bankers for advice on how to proceed, but regulatory concerns and its image overseas could pose significant obstacles. The company, which was founded by a former officer of the Chinese military, has been blocked out of some contracts, including one from the Australian government, and has faced criticism for its involvement in providing equipment to Iran.