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Chinese Telecoms a Threat to US, Says Report

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A receptionist sits behind the counter at the Huawei office in Wuhan, central China’s Hubei province on October 8, 2012. (STR/AFP/Getty Images)

A Congressional panel said on Monday that two major Chinese telecommunications firms are a security threat to the United States and should not be involved in any mergers and acquisitions with American companies because their equipment might be used for spying.

The House Intelligence Committee, following a year-long investigation, said on Monday that Huawei and ZTE might have ties with the ruling Chinese Communist Party and military. The companies are some of the largest producers of networking equipment in the world.

“Private-sector entities in the United States are strongly encouraged to consider the long-term security risks associated with doing business with either ZTE or Huawei for equipment or services,” said the report from the House Intelligence Committee.

Huawei and ZTE also failed to fully cooperate with the committee’s investigation, the panel said, but added that the United States should not yet boycott mobile phones and other consumer electronics produced by the two firms. The report mainly dealt with large-scale data storage on the two firms’ networking equipment, which would put American companies at risk.

Under Chinese law Huawei and ZTE must comply with the Chinese regime if it asks to use their systems, the report said. It can “access them for malicious purposes under the guise of state security.” 

“A sophisticated nation-state actor like China has the motivation to tamper with the global telecommunications supply chain, with the United States being a significant priority,” it said.

The report also said U.S. government agencies should not use computer systems that have components from either company, citing concerns that hackers have stolen sensitive official data in the past. Chinese hackers are also known to target the intellectual property of private firms on a vast scale. 

“Actors in China seeking sensitive economic and national security information through malicious cyber operations often face little chance of being detected by their targets,” it stated.

“Chinese intelligence collection efforts against the U.S. government are growing in scale, intensity, and sophistication,” while Chinese hackers are “the world’s most active and persistent perpetrators of economic espionage,” the report said.

The Chinese regime is making an attempt to gain advantage over the United States’ superior military in the case of a potential conflict, the committee said. By placing malicious software in Chinese-manufactured equipment used in the United States, Beijing could potentially shut down or imperil critical infrastructure, including power grids and financial networks.

The report will possibly be cited by both President Barack Obama and his Republican challenger, Mitt Romney, in the presidential campaign. Both candidates have said they would take tougher measures on Chinese economic violations. Romney has said that if elected, he would deem China a currency manipulator and would highlight the company as one that steals American intellectual property.

In a statement on Monday, Huawei denied the allegations contained in the report because it “failed to provide clear information or evidence to substantiate the legitimacy of the Committee’s concerns.”

“Huawei has cooperated with the Committee in an open and transparent manner, and engaged in good faith interaction,” the statement reads.

ZTE echoed Huawei’s claims, according to Reuters.

“ZTE should not be a focus of this investigation to the exclusion of the much larger Western vendors,” the company said in a letter obtained by the news agency.

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