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House Intelligence Committee report blasts Huawei, ZTE as threats to U.S. national security

Ellen Messmer | Oct. 9, 2012
China-based Huawei and ZTE pose a national-security threat to the U.S. because of spying and stealing of data that could be done on behalf of the Chinese government through any network based on vendors' network service provider gear, according to an investigative report issued Monday by the U.S. House Intelligence Committee.

The Committee report asserts that undisclosed companies in the U.S. using Huawei or ZTE equipment have "experienced odd or alerting incidents" using the Chinese manufacturers' equipment "which they declined to make public." The report says it heard current and former employees tell of "flaws" in Huawei and ZTE equipment and "potentially unethical or illegal behavior by Huawei officials."

The Committee says it didn't attempt a review of Huawei or ZTE equipment. But it said it heard allegations of backdoors or "unexpected elements" in both companies' products.

The Committee report concludes it did not receive fully documented answers to its main questions about how Huawei and ZTE are connected to the Chinese government and military, and that the two companies treat their internal documentation as a "state secret." But the report also said that Huawei "admits that the Chinese Communist Party maintains a Party Committee within the company," though it failed to explain what it does exactly or who's on that committee. Huawei apparently responded this is a typical practice for companies in China. When it came to the question of whether Huawei gets special financing from the Chinese government, the report says Huawei denies that it does but refused to answer how its credit lines developed.

"Huawei's connection to the Chinese Communist Party is a key concern because it represents the opportunity for the State to exert its influence over the decisions and operations of a company seeking to expand into the critical infrastructure in the United States," the House Committee report states. The report also says it received from former Huawei employees some internal documentation that indicates that Huawei provides special network services to what the employee believes to be "an elite cyber-warfare unit" with the Chinese People's Liberation Army. The report says Huawei did acknowledge it provides network products of a wide variety for the Chinese military, but declined to discuss research and development.

The report says the Committee learned that privately held Huawei is structured to have 60,000 shareholders but that a shareholder agreement gives Huawei Founder and President Ren Zhengfei veto power. Huawei officials also explained to the Committee that Chinese law forbids foreigners from holding shares in Chinese companies without a special waiver.

The report also said it doesn't believe Huawei's claims that Huawei USA is operated largely independently of the parent company in China after the Committee interviewed current and former employees of Huawei USA who described the company otherwise.

 

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