China’s two largest telecom equipment makers should be barred from certain deals with US companies because they provide Chinese intelligence services too great a chance to spy in this country, a hard-hitting congressional report urged yesterday,
The report, which reads like a real-life, international-spy drama, found that Huawei Technologies and ZTE Corp. couldn’t be trusted not to spy through any US phone systems they might create.
“Huawei and ZTE seek to expand in the United States, but as a result of our investigation, we do not have the confidence that these two companies with their ties to the Chinese government can be trusted with infrastructure of such critical importance,” said Rep. Mike Rogers (R-Mich.), House Intelligence Committee chairman.
Huawei and ZTE provide Chinese intelligence agencies with “a wealth of opportunities . . . to insert malicious hardware or software implants” into telecom components headed for US, the report found.
The companies yesterday denied the allegations.
The shocking accusations come as ZTE yesterday confirmed reports that San Jose, Calif., equipment maker Cisco Systems has severed its ties with ZTE amid allegations that it has been selling Cisco’s networking gear to Iran.
ZTE spokesman David Dai Shu told the Wall Street Journal that Cisco ended its seven-year partnership with ZTE several days ago.
“We know it’s related to Iran,” the spokesman said.
The report, which came after a yearlong investigation, all but demanded US entities — public and private — stop dealing with the two companies, thus threatening their efforts to expand here.
They also recommended that the Committee on Foreign Investment in the US “block acquisitions, takeovers, or mergers” with the companies.
The committee’s investigation also found evidence of immigration violations, bribery and corruption, discriminatory behavior and copyright infringement.
Specifically, the committee said Huawei employees visiting from China on tourist or conference visas are actually working full time at Huawei facilities in the US.
It plans to alert the Department of Homeland Security to the immigration allegations and will forward the bribery evidence to the FBI.
“Despite our best effort, the committee appears to have been committed to a predetermined outcome,” Huawei said in a statement.