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Monday, October 08, 2012
Congress Says ZTE, Huawei Open U.S. To Spying


China's phone-equipment makers Huawei Technologies Co. and ZTE Corp. provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying, according to a congressional report.

The House intelligence committee report says the two companies failed to cooperate with an investigation and to adequately explain their U.S. business interests and relationship with the Chinese government.

"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," says the report from the committee's chairman, Michigan Republican Mike Rogers.

The report highlights the interconnectivity of U.S. critical infrastructure systems and warns of the heightened threat of cyber espionage and predatory disruption or destruction of U.S. networks if telecommunications networks are built by companies with known ties to the Chinese state.

Additionally, the report notes that modern critical infrastructure is incredibly connected, everything from electric power grids to banking and finance systems to natural gas, oil, and water systems to rail and shipping channels. All of these entities depend on computerized control systems. The risk is high that a failure or disruption in one system could have a devastating ripple effect throughout many aspects of modern American living.

The report, released today in a Capitol Hill news conference, states that Huawei and ZTE provided incomplete, contradictory, and evasive responses to the Committee?s core concerns. The report comes after a year-long investigation into the national security dangers posed by Huawei and ZTE, the two largest Chinese telecommunications companies doing business in the United States.

The report recommends US government systems and US government contractors, particularly those working on sensitive systems, exclude any Huawei or ZTE equipment or component parts. Additionally, is says the Committee on Foreign Investments in the United States (CFIUS) must block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests.

The committee plans to refer such allegations to the Justice Department and Department of Homeland Security.

Both Huawei and ZTE have faced repeated accusations that the companies' equipment could be used by the Chinese government to spy on U.S. telecommunication networks.

The two Chinese firms have mounted a major lobbying campaign in Washington to allay fears of government influence in their operations. The companies hope they will be able to expand their share significantly.

Huawei rejected the committee's allegations.

"The report conducted by the House Permanent Select Committee on Intelligence , which took 11 months to complete, failed to provide clear information or evidence to substantiate the legitimacy of the Committee's concerns," Huawei said.

The company claims that it has cooperated with the Committee during its investrigations.

"The report released by the Committee today employs many rumors and speculations to prove non-existent accusations. This report does not address the challenges faced by the ICT industry. Almost every ICT firm is conducting R&D, software coding and production activities globally; they share the same supply chain, and the challenges on network security is beyond a company or a country. The Committee's report completely ignored this fact. We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market."

"We, like many companies in our industry, have benefited from free and fair trade and the process of globalization, and we will continue to push, in the United States and internationally, for open markets, cooperative innovation, and equal opportunity for all companies," Huawei added.

ZTE also stated it "profoundly disagrees" with the claim that it is directed or controlled by the Chinese government. "ZTE should not be a focus of this investigation to the exclusion of the much larger Western vendors," it said.


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