October 8th, 2012
12:14 AM ET

Congressional report: U.S. should 'view with suspicion' two Chinese companies

By Pam Benson

The United States faces a potential security threat from two Chinese telecommunication companies operating inside the United States, according to a congressional report to be released Monday.

CNN obtained a draft report of the nearly year-long probe by the House Intelligence Committee into the business practices of Huawei and ZTE telecommunications firms.

Huawei and ZTE respond

The report concluded, "the United States should view with suspicion the continued threat of the U.S. telecommunications market" by the Chinese companies.

Huawei is a nearly $30 billion Chinese company employing 120,000 people worldwide with approximately 1,500 in the United States. It is one of the top three providers of telecommunications equipment and information communications technology in the world. ZTE is a similar but smaller firm.

When Intelligence Committee Chairman Mike Rogers, R-Michigan, announced the probe last November, he said he feared the phones Americans use and other communications systems the United States depends on could be a Trojan horse giving the Chinese government access to the United States critical infrastructure so it can carry out economic and military espionage. He referred to China's "voracious appetite" for stealing commercial intellectual property.

The report faults Huawei and ZTE for failing to satisfactorily cooperate with the committee's investigation and provide details about the company's operations and connections to the Chinese government.

"Neither company was willing to provide sufficient evidence to ameliorate the Committee's concerns. Neither company was forthcoming with detailed information about its formal relationships or regulatory interaction with Chinese authorities. Neither company provided specific details about the precise role of each company's Chinese Communist Party Committee. Furthermore, neither company provided detailed information about its operations in the United States," the report stated.

Huawei took the brunt of the criticism in the report, a company Rogers previously referred to as "the 800-pound gorilla in the room."

In an interview with CBS' "60 Minutes" on Sunday night, Rogers warned American companies to think twice about doing business with Huawei.

"I would find another vendor if you care about your intellectual property, if you care about your consumer's privacy and you care about the national security of the United States of American," Rogers said on the program.

Although the report indicates there is no proof of wrongdoing by the companies, their failure to satisfactorily respond to the committee's questions factored into five recommendations:
- The U.S. government should block any acquisitions, takeovers or mergers involving the two companies as well as ban using any of their equipment in U.S. government systems
- U.S. companies should consider the long-term security risk with doing business with the Chinese firms
- Congress and law enforcement agencies should further investigate the companies
- The Chinese companies should become more transparent and responsive to U.S. obligations
- Congress should consider legislation to improve information-sharing on the risk posed by suspect telecommunication companies

In addition to the 59-page draft report there is a classified annex that is said to contain more detained information about the committee's concerns.

There was no immediate response from the Chinese companies or the Chinese government Sunday night.

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Filed under: China • Congress • Intelligence
soundoff (50 Responses)
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  3. Prejudice

    Prejudice without any evidence!

    October 10, 2012 at 8:28 pm | Reply
  4. Sheesh

    Americans are SO ignorant!

    Supporting a country economically and allowing them to gain a foothold in our own domestic market so they can compete against us.

    No one apparantly learned lessons the first time around, now people ignore the facts and deal with a much more aggressive and dangerous situation, this time with a country that has military aspirations to dominate the world.

    All you corporate ****s and consumers that support them will be stooping to all kinds of lows to save their literal asses when China reigns supreme over all.

    October 10, 2012 at 5:38 pm | Reply
  5. watchout

    Boycott Huawei and ZTE Telecommunications now.

    October 10, 2012 at 4:17 pm | Reply
  6. Gary

    This is totally non-sense. US gov do not have any evidence or proof on this. This is like a bias or prejudice. If US open this bad example, all the countries can do the same to US companies like Cisco, Microsoft, Intel, Apple...

    October 9, 2012 at 4:19 pm | Reply
    • Cheese Wonton

      We do not have access to the classified annex which, I am sure, has the evidence tying them to the Chinese government. That sort of material is not made public because you don't want the other side to suspect your sources of information.

      October 9, 2012 at 11:02 pm | Reply
      • Patrick

        yep. spot on.

        moreover, it happens at alarming rate. extradition treaties are needed or we'll only end up whining about it and continue to lose proprietary information.

        October 10, 2012 at 4:00 pm |
  7. One-Eye-Open

    There are many tens of thousands, of former Chinese immigrants are working in the high tech, biotech, financial and other critical sectors in the USA. While 99.99% are loyal Americans, many of those that patriate our shore are the Chinese elite & often members of the communist party. And in examples I know personally, these intelligent, highly educated, and soon to be integral members of the USA innovative society were approached by Chinese gov't agents... and requested/threatened to become 'cooperative' with the Chinese gov't for the sole purpose of espionage. This is a problem few are aware of... and even fewer are willing to admit publically. But it is a BIG problem...

    October 9, 2012 at 4:11 pm | Reply
  8. Satan

    You Reap What You Sew.

    October 9, 2012 at 4:03 pm | Reply
    • Steve

      ...sow.

      October 10, 2012 at 11:29 am | Reply
  9. Baburee

    Without Huawei and ZTE, this world won't be so convenient for communication. Take it or not, like all other house hold things that china is providing to the world, telecom is also the same.Why do always Ericsson, Nokia, and ALU get rich making peoples around the world poor, instead Hauwei and ZTE are making considerable amount of money and yet providing the good technology in lesser price.

    October 9, 2012 at 1:40 am | Reply
    • Cheese Wonton

      You are not thinking this through. China saves money by stealing other peoples patented technologies. They don't spend the time and money on basic research whenever they can steal what they want. A telecommunications technology company like these has access to the business and technology secrets of it's customers, and these secrets will flow from their rightful owners to unscrupulous Chinese business, via their government, and be used to undercut and put out of business the innovators they copy. If you think this is ok, you need to rethink your values. It is not ok.

      October 9, 2012 at 11:06 pm | Reply
  10. Clinton

    The Chinese are a Society of Thieves... They have been for the last 30 years or so... They make nothing original... have no original thought... they have almost 2 billion people and not one can come up with an original technology... It's the sad truth but this is the state of things... This is what a communist country provides... They do not encourage original thought, do not encourage thinking outside the box and therefor unless they steal it, they will not develop it... China would still be in the 1700's if they didn't interact with the outside world at all and steal technology. It's rediculous... the world needs to start hammering down on China... Yes cheap manufacturing goods are great and all but they're poor quality pieces of trash and don't even work half the time... start imposing massive sanctions on China until they start playing by the rules... They don't sell anything crucial to anybody... In fact they have to import food to feed their people... without us they would starve.

    October 8, 2012 at 6:34 pm | Reply
    • txwiseman

      Except for the fact that there are 1.3 billion chinese (thank god), everything you say is absolutely correct. Unfortunately, its the greed of our corporations and timidity/stupidity of our politicians that has created this monster

      October 8, 2012 at 10:25 pm | Reply
    • Vash

      It's a society that's going to surpass yours both economically and militarily in the next 2 decades. Drink any more Kool Aid?

      October 10, 2012 at 12:36 am | Reply
      • History

        The idea that China is poised to become "the power in the world" has been around for centuries, and they have consistently failed to make good on it.
        Is it possible? Yes. Is it a foregone conclusion? Clearly not.

        October 10, 2012 at 7:25 am |
  11. Darkguardian1314

    Much cheaper and easier for China to go this route than to send troops and equipment to fight a war.
    This isn't a witch hunt. China is known for taking IP from companies including Apple and using it to make their own stuff for military purposes as well as to compete against the companies that they stole the tech from in the first place.
    The two companies are just now releasing smartphones that are incredibly cheap into the US market that are only going to get better as time goes on.
    The two companies named are just too close to the China government and can be viewed as an arm of the Chinese government. With ransomware starting to become an increasing problem, China doesn't need to eavesdrop. They can encrypt the data so it's totally useless to the users. This goes not just for smartphones but any device handling data like laptops and tablets.
    NASA refused to allow access to the International Space Station for the same reason.

    October 8, 2012 at 3:32 pm | Reply
  12. Johnm

    More Republican regulation – I should be free to buy what I want, particularly if it saves my business money. This is why we need smaller government!

    October 8, 2012 at 2:01 pm | Reply
    • Darkguardian1314

      You are free to buy what you like if you have the money to buy it in the first place. Namely a job. How would you feel to lose your job and have your company close and latter find that it was due to some underhanded eavesdropping from the Chinese government. Kruschev words ring loud today as it did in the 1960s, “Communism will dance on the grave of the capitalist and we will sell you the rope you use to hang yourself.”

      October 8, 2012 at 3:40 pm | Reply
      • Johnm

        You may well be right about communism's ultimate aim, but this is also government interference with the free enterprise system. A Catch 21?

        October 8, 2012 at 3:54 pm |
      • Cheese Wonton

        When did "free enterprise" become a license to sell one's nation out to another?

        October 9, 2012 at 11:08 pm |
    • Bill

      It's not a (R) or (D) thing....it's about security!!! Just think about it!!

      October 9, 2012 at 1:23 am | Reply
      • Stone

        There are millions of user on Intel CPU, Apple's iPhone and Microsoft in China. If we apply same standard in here, should China also block out all US IT companies?

        October 17, 2012 at 2:10 am |
  13. mike electrician

    In the long run, we know who will remain No. 1. .China can't make anything original, they copy or pirate most intellectual property. They had to buy a used Russian aircraft carrier. I also judge the quality of a country by how many people try to get there by any means. I have not read any stories about someone crossing the Gobi desert or packed in a ship container like sardines in order to live in China. Where do the Chinese send their kids if they want a excellent future? If you asked a Chinese family, where would like your child to go to college? my guess would be somewhere in England or the U.S. So they can build their economy building cheap junk, which we all buy because it is cheap. But sooner or later, it will catch up with them, because although they have an infinite supply of poor rural people who would jump at a chance to work 16 hour days at a factory, instead of earning a meager life on a farm, this is not a recipe to build a super power.

    October 8, 2012 at 10:25 am | Reply
    • WorldViewer

      Riiiiight, because the US has not done that very same thing, taking advantage of cheap labor mostly from illegal immigrants...

      October 9, 2012 at 2:11 pm | Reply
      • That's a joke, right?

        The US does not use cheap foreign labor as the basis of our economy. We use that sort of thing for services within our nation. Completely different from using cheap labor in factories.
        China's major exports are primarily goods, the US major exports are primarily ideas and services. They really are fundamentally different. It creates an asymmetry where China can steal our exports because they are largely intangible, where we cannot reasonably steal their exports because they are physical goods. You might be a "WorldViewer," but you are clearly not a "WorldUnderstander."

        October 10, 2012 at 7:31 am |
  14. Rose

    The US ought to kick these companies out of the country, china would do it to any country, especially the US, if we failed to cooperate with an investigation carried out by the gov't. if the companies raise red flags they need to leave, period.

    October 8, 2012 at 7:19 am | Reply
  15. Oldeye

    When it comes to innovation and technologies, I am sure that everyone steals from
    one another. We are faced with a giant provider of manufactured goods for very
    low costs which we take for granted. This is a loosing battle where the Chinese
    are already very entrenched in every facet of American manufacturing and technologies
    know-how through greedy and willing American companies. We have trained and used
    their "cheap" labor, built factories in their land and basically gave them the tools to advance.
    We are the ones to blame. But then again, who is to say all is fair and square? We are the
    capitalists to the max. We reap what we sow.

    October 8, 2012 at 7:04 am | Reply
    • choci

      you sound chinese

      October 8, 2012 at 11:20 am | Reply
    • choci

      to hell with China, and the Chinese posting here.

      October 8, 2012 at 11:21 am | Reply

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