China’s top telecoms gear makers should be shut out of the U.S. market as potential Chinese state influence on them poses a security threat, the U.S. House of Representatives’ Intelligence Committee said in a draft of a report to be released on Monday.
The U.S. panel’s draft report faulted both Huawei and ZTE for failing to satisfy its requests for documents, including detailed information about formal relationships or regulatory interaction with Chinese authorities.
U.S. companies thinking about buying from Huawei should “find another vendor if you care about your intellectual property; if you care about your consumers’ privacy and you care about the national security of the United States of America,” panel chairman Mike Rogers said in comments broadcast late on Sunday on the CBS News program “60 Minutes.”
Rogers and the committee’s top Democrat, C.A. Ruppersberger, have scheduled a 10 a.m. Eastern time (1400 GMT) news conference to release the final, unclassified version of their report.
The panel said it received credible allegations from unnamed industry experts and current and former Huawei employees suggesting Huawei, in particular, may be guilty of bribery and corruption, discriminatory behavior and copyright infringement.
The committee plans to refer such allegations to the Justice Department and Department of Homeland Security, according to the draft made available to Reuters. “U.S. network providers and system developers are strongly encouraged to seek other vendors for their projects,” it said.
The document cited what it called long-term security risks supposedly linked with the companies’ equipment and services. Based on classified and unclassified information, Huawei and ZTE, which are both based in Shenzhen, China, “cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems,” it said. Huawei and ZTE are rapidly becoming “dominant global players” in the telecommunications market, which is intertwined with computerized controls for electric power grids; banking and finance systems; gas, oil and water systems and rail and shipping, it noted.
ZTE’s U.S. telecoms infrastructure equipment sales last year were less than $30 million. In contrast, two of the larger Western vendors alone had combined U.S. sales that topped $14 billion, ZTE told the committee in its September 25 letter, an apparent reference to Finland-based Nokia Siemens Networks and Paris-based Alcatel Lucent.
“It seems self-evident that the universe of companies examined by the Committee is so small as to omit most of the equipment actually employed in the U.S. telecom infrastructure system,” the letter said.
“MEANS, OPPORTUNITY, MOTIVE”
Huawei and ZTE may not be the only companies that present a risk to U.S. infrastructure, the committee’s draft report said, but
they are the two largest Chinese-founded, Chinese-owned companies seeking to market critical network equipment to the United States. Beijing has the “means, opportunity and motive” to use them to its own ends, it added.
Top executives of both told a committee hearing on September 13 that their companies would never bow to a hypothetical Chinese government effort to exploit their products for espionage, equating any such move with corporate suicide. “Huawei has not and will not jeopardize our global commercial success nor the integrity of our customers’ networks for any third party, government or otherwise,” senior vice president Charles Ding testified at the time.
U.S. intelligence officials have publicly denounced China as the world’s most active perpetrator of economic espionage against the United States.
Huawei has marketed its network equipment in the United States since last year, and has sold to a range of small- to medium-sized carriers nationwide, particularly in rural areas.
Founded by CEO Ren Zhengfei 25 years ago after he was laid off by the Chinese army, Huawei has marketed mobile phones through a broader range of U.S. carriers for the last four years. U.S. sales totaled $1.3 billion last year, out of overall sales of $32 billion, executives said.