American companies should avoid sourcing network equipment from China's two leading technology firms because they pose a national security threat to the United States, the House Intelligence Committee warned Monday.
The panel said in a report that U.S. 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.
William Plummer, vice president for external affairs for Huawei, said his company, a private entity founded by a former Chinese military engineer, was being victimized because of U.S. government concerns about China's government. "Huawei is Huawei, Huawei is not China," he told reporters.
Reflecting U.S. concern over cyberattacks traced to China, the report recommends that U.S. government computer systems not include any components from the two firms because that could pose an espionage risk.
"China is known to be the major perpetrator of cyber-espionage, and Huawei and ZTE failed to alleviate serious concerns throughout this important investigation. American businesses should use other vendors," the committee's chairman, Rep. Mike Rogers (R-Mich.), told a news conference. He said the Chinese companies could not be trusted with access to computer networks that support everything from power grids to finance systems.
The recommendations are the result of a yearlong probe, including a congressional hearing last month in which senior Chinese executives of both companies denied posing a security threat and being under Beijing's influence.
Rogers said the two companies are clearly tied to the Chinese government, and that allowing Huawei and ZTE to provide network equipment and services in America risks confidential consumer information and undermines core national security interests. He said the committee was not concerned about the sales of handsets that make up the bulk of their U.S. businesses, but rather network infrastructure where they have made fewer inroads.
Ahead of the report's release, China's foreign ministry said investment by telecommunications companies is mutually beneficial. "We hope the U.S. will do more to benefit the interests of the two countries, not the opposite," spokesman Hong Lei said at a regular briefing in Beijing Monday.
The panel's recommendations will likely hamper Huawei and ZTE's ambitions to expand their businesses in the United States.