China tech giants pose security threat: US panel

US panel says US regulators should block mergers and acquisitions by Huawei Technologies Ltd and ZTE Corp.

Updated: Oct 08, 2012, 15:52 PM IST

Washington: American companies should avoid doing business with China`s two leading technology firms because they pose a national security threat to the United States, the House Intelligence Committee is warning in a report to be issued on Monday.

The panel says US regulators should block mergers and acquisitions in this country by Huawei Technologies Ltd and ZTE Corp, among the world`s leading suppliers of telecommunications gear and mobile phones.

Reflecting US concern over cyber-attacks 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 yearlong 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," said William Plummer, vice president for external affairs.

Today, ahead of the report`s release, a Chinese foreign ministry spokesman said investment by China`s telecommunications companies in the United States 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," said spokesman Hong Lei 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 Mitt Romney, in particular, has made it a key point to get tougher on China by designating it a currency manipulator and fighting abuses such as intellectual property theft.

The committee made the draft available to reporters in advance of public release today, but only under the condition that they not publish stories until the broadcast yesterday of a CBS` "60 Minutes" report on Huawei. In the CBS report, the committee`s chairman, Rep Mike Rogers, R-Mich, urges American companies not to do business with Huawei.

The panel`s recommendations will likely hamper Huawei and ZTE`s ambitions to expand their business in America. Their products are used in scores of countries, including in the West. Both deny being influenced by China`s communist government.