Telecom firms deny US security threat allegation

Updated: 2012-09-15 10:09

By Tan Yingzi in Washington, Zhang Yuwei in New York and Shen Jingting in Beijing (China Daily)

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Chinese technology giants Huawei Technologies Co and ZTE Corp denied allegations that their companies pose a security threat or are under the influence of China's government, during a three-hour congressional hearing before the US House Intelligence Committee on Thursday.

The committee is wrapping up a year-long probe into whether the Chinese companies pose a risk to US national security.

"Huawei and ZTE provide a wealth of opportunities for Chinese intelligence agencies to insert malicious hardware or software implants into critical telecommunications components and systems," committee chairman Mike Rogers said in his opening statement, citing unnamed sources who said both companies have anomalies in their equipment which allow access by unauthorized users.

Both Charles Ding, Huawei's corporate senior vice-president, and Zhu Jinyun, ZTE's senior vice-president for North America and Europe, denied the allegations.

The committee also questioned the two executives on their companies' ties with the Chinese government.

Both executives denied that their companies receive special treatment from the Chinese government or pose a security threat.

The committee launched a security probe into the two companies in November. In May, a congressional delegation, including some of the committee members, went to China where they met Ren Zhengfei, Huawei's board chairman, and the top management of ZTE.

Both headquartered in Shenzhen, Huawei is the second-largest telecommunications equipment manufacturer in the world, and ZTE is the world's fifth-biggest.

According to Ding, 70 percent of Huawei's $32 billion revenue is generated from the company's overseas markets.

"ZTE is not an SOE (State-owned enterprise) or government controlled. Indeed, ZTE is China's most independent, transparent, globally focused, publicly traded telecom company," said Zhu, emphasizing the company has about 140,000 global shareholders.

ZTE established its presence in the US about 15 years ago. It now has 14 offices, employing more than 400 people.

Zhu said the scale of ZTE's US operation is relatively small and the company is not making much of a profit in the US market so far.

To some extent, the US government's national security policy has made it hard for ZTE to expand in the US, he said.

Yitai Hu, a partner with Alston and Bird LLP and an intellectual property litigator, said the stated purpose and name of this hearing has unfortunately already cast a shadow over ZTE and Huawei.

This was the first time the Chinese telecom companies had the chance to communicate with the US authorities in public.

"For Huawei and ZTE, the hearing is a pretty good chance to demonstrate their innocence and dispel suspicions in front of all American people," said Yang Haifeng, a telecom expert who is also chief editor of Communications World Weekly.

In order to expand in the North American market, it is a must for Huawei and ZTE to overcome the US authorities' obstacles, he added.

Political factor

Wu Hequan, an academician of the Chinese Academy of Engineering and an industry insider, said he is not optimistic about Huawei and ZTE's future in the US market.

"The world faces an economic slowdown, and with election year in the United States, politicians are speaking out in favor of local businesses," Wu told China Daily.

The rise of Chinese telecom companies pose great threats to their US-based rivals, and "national security" is the best excuse to bar Huawei and ZTE from the market, he said. "In contrast to international trading sanctions which asks for solid proof, 'national security' is vague and easy to be disguised," Wu added.

The frequent charges and accusations from the US side have already tarnished the market's reputation as "an open and fair one", Wu said.

In a related development on Friday, Huawei Australia Chairman John Lord said in Canberra that he is concerned that new Australian laws to protect communication networks from cyber attacks could exclude companies from tendering for work simply because they are Chinese.

Huawei's Australian subsidiary was last year barred on security grounds from working on a national broadband network that is now under construction.

Lord told a parliamentary committee hearing on the proposed law that Australia could lose its competitive edge if it excluded companies from sensitive projects based on their nationality alone.

AP contributed to this story.