Intelligence agencies advise caution over Huawei and ZTE operation in the US

Chinese telecom vendors Huawei and ZTE should not be allowed to operate in the US due to potential links with the Chinese state, according to a draft report from the House of Representatives’ Intelligence Committee seen by Reuters.

The committee said the companies cannot be trusted to avoid influence from the Chinese state and pose a potential risk to the US following an 11-month investigation. Both companies were criticised in the unclassified report for failing to provide sufficient information about formal relationships and regulatory interaction with the Chinese state that would allay the concerns.

The committee warned potential customers to seek other vendors for their projects and urged the US intelligence service to inform the private sector about the potential espionage threat. The body is also seeking to block any mergers of acquisitions involving the firms in the US.

Allegations have been made by industry experts and Huawei employees, past and present, that the company could be guilty of bribery, corruption, discrimination and copyright infringement. The committee will refer these allegations to the Justice Department, Homeland Security, and other US government bodies.

Both companies denied the accusations in September that their equipment had been installed with code to allow sensitive information to be sent back to China, according to a BBC report. Senior executives from both companies made the statements in front of a House Intelligence Committee.

Committee chairman Mike Rogers said that there had been reports of ‘backdoors’ and unexplained beaconing – a process in which networks self-repair – from equipment sold by the two companies.
The report comes as Huawei reportedly considers an IPO in an effort to overcome suspicions that have hindered its efforts to gain a foothold in the US market so far.