Panel recommends banning Chinese telecoms from US

A congressional report released Monday concluded that two Chinese telecommunications firms pose a national-security threat to the United States and should be blocked from doing business in the country.

After a yearlong investigation, the House Intelligence Committee concluded that telecom giants Huawei and ZTE failed to provide sufficient information to ease concerns that the Chinese government could use them to spy on the United States or sabotage critical communications networks.

"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the investigators wrote.

The intelligence committee's report said the two companies failed to provide detailed information about their ties to the Chinese Communist Party, their governance structures or operations in America.

Congressional investigators said they also found evidence that Huawei might have engaged in bribery, corruption and copyright infringement.

A spokesman for Huawei denied the charges and said the committee was engaged in "China bashing."

Intelligence Chairman Mike Rogers (R-Mich.) said evidence of criminal allegations would be forwarded to the FBI. He declined to discuss details, but he said it was a "clear case of bribery" of an American company and he is "confident it will lead to an open investigation."

The committee recommended that the Treasury Department's Committee on Foreign Investment in the United States block acquisitions, takeovers or mergers involving Huawei and ZTE. They said Congress should consider proposals to expand the agency's authority to block purchasing agreements as well.

They said the U.S. government should not use the companies' equipment and strongly recommended that American companies refrain from doing business with them.

With $32 billion in annual revenue, Huawei is now the world's largest telecom equipment maker, having recently overtaken Sweden's Ericsson. ZTE, meanwhile, is the fifth-largest telecom company.

The companies make the equipment used to build next-generation cellular networks and produce mobile phones. The lawmakers said they focused their investigation on the companies' network equipment and not their consumer products.

Both companies have minimal presence in the United States, but are looking to expand their operations.

Rep. Dutch Ruppersberger (D-Md.), the panel's top Democrat, noted that the Chinese government has the power to compel companies to turn over sensitive information and said China is already engaged in aggressive cyber espionage against the United States.

Ruppersberger said he fears China could compel Huawei and ZTE to "hand over the personal information of Americans, or worse yet spy on them."

The Maryland Democrat rejected charges that the report is "trade protectionism masquerading as national security,” though the lawmakers said China’s subsidies to Huawei allow the company to offer "bargain-basement prices" to U.S. consumers. 

"These customers may have no idea about the national security implications of their purchase," Ruppersberger said.

Huawei and ZTE insist the concerns raised by lawmakers are baseless.

Bill Plummer, Huawei’s vice president for external affairs in the United States, said the company "unequivocally" denies the accusations made in the report.

While the report is "quite strong on rhetoric, it is utterly lacking in substance," Plummer said. 

"This report is little more than an exercise in China-bashing and misguided protectionism," he said during a conference call with reporters. "And selecting a world-respected company like Huawei as a proxy for such attacks is also an egregious example of libel."

Plummer told The Hill last week that the company wouldn't jeopardize its international revenue to appease the Chinese government.

"The suggestion that there's a conspiracy for Huawei to infect its own equipment at the behest of a government — really? That would require hundreds, thousands of people within the company to be involved in the conspiracy," he said.

He argued that although Huawei was founded in China, it is global in scope, just like many other major companies. He added that most technology companies design and build their products in facilities around the world, including in China.

"There is not a network in this country today that doesn't have gear in it that has been developed, designed and coded on a global basis, including in China," Plummer said.

He warned that banning Huawei from the United States would be "just politics" and would mean "less jobs, less foreign investments, less innovation, less competition, higher-cost broadband, increased trade tensions [and] nasty market-distorting precedents that, God forbid, could be used against American companies overseas."

— This story was updated at 11:57 a.m., 12:08 p.m. and 3:15 p.m.