China tech firms probed by US intelligence

Quest for more access to US market checked for possible security threat.

September 13, 2012   by ASSOCIATED PRESS

WASHINGTON — US lawmakers will question executives of two major Chinese technology companies Sept. 13 as part of a congressional probe into whether those firms’ ambitions to carve out a bigger niche in the American market pose a threat to national security.

The House Intelligence Committee is probing Huawei Technologies Ltd., which was founded by a former Chinese military engineer and has grown to become the world’s second largest supplier of telecommunications network gear. Also under scrutiny is its rival ZTE Corp., which is partly state-owned and is the world’s fourth largest mobile phone manufacturer.

Lawmakers fear the companies could pose an espionage risk. Those concerns have hampered Huawei and ZTE’s expansion in the US, particularly beyond selling mobile devices to the provision of network infrastructure. They deny being a security threat.

The committee is expected to finalize its investigation in early October.

The hearing might also raise with ZTE the alleged sale of banned US-sanctioned computer equipment to Iran. The company is facing a Commerce Department investigation into such sales, and the FBI is probing allegations the company obstructed that investigation.

ZTE says it welcomes the hearing as an opportunity to respond to criticism that associates them directly with the Chinese government and competitor companies. They also want to provide security assurances to enable their entry into the lucrative US network infrastructure market.

“We respect the US government’s security concerns,” ZTE senior vice-president Zhu Jinyun said ahead of Thursday’s hearing. “We need to work together to find a solution for those concerns, and this should be our start.”

The committee has requested exhaustive information from both Huawei and ZTE on their ownership structures and connections to the Chinese government and Communist Party, saying it wants to establish if they can truly act as private companies. It has sought details of meetings over the past five years and credit received through state institutions.

That reflects abiding US suspicion over cyber attacks on foreign governments and companies that have originated in China. The Obama administration has sought deeper ties with Beijing, but relations have been strained on security, trade and human rights – issues that Republican and Democratic lawmakers alike often speak out on.

Seeking to allay security concerns, Huawei this month issued a report on cyber security that includes a pledge never to co-operate with spying. It says its equipment is used by 45 of the world’s 50 biggest phone companies.

Huawei’s founder, Ren Zhengfei, met with British Prime Minister David Cameron and announced plans to invest $2 billion to expand its operation in Britain.

Huawei, however, has released few details about who controls the company, which still fuels suspicions abroad. Australia in April barred the company from bidding to work on a planned high-speed Internet network due to concerns about cyber attacks traced to China. The company had to unwind its purchase of a US computer company, 3Leaf Systems, last year after it failed to win approval from a government security panel.

In Washington, Huawei’s vice-president for external affairs, William Plummer, said that because of overlapping nature of global supply chains, addressing the vulnerability of networks required universal standards rather than scrutiny of a single company.

He said Huawei would never compromise the integrity of its customers’ networks – which account for more than 70 per cent of its business outside China – as it would be “corporate suicide.”

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