Huawei, ZTE slam 'unfair' US probe

By Yang Jingjie Source:Global Times Published: 2012-10-9 1:35:03

Chinese telecommunications giants ZTE Corporation and Huawei Monday rejected a US congressional investigation into them, accusing it of being "unfair" and "impeding competition," as the US House of Representatives' Intelligence Committee concluded that the pair poses a security threat to the US.

The panel Monday released an unclassified version of the report based on an 11-month investigation, saying that the two firms could be used to undermine US security.

"China has the means, opportunity and motive to use telecommunications companies for malicious purposes," AFP quoted the report as saying.

The report faulted both companies for failing to satisfy the committee's requests for documents to allay its concerns, including detailed information about formal relationships or regulatory interaction with Chinese authorities, according to Reuters.

China's foreign ministry spokesman Hong Lei Monday said that Chinese telecom firms carry out international operations in accordance with market economy principles, and their investment in the US reflects the mutually beneficial and win-win nature of Sino-US economic and trade relations.

"We hope the US Congress can respect the facts and put aside biases. It should promote Sino-US trade cooperation, not the opposite," said Hong.

Responding to the allegations, ZTE spokesperson Dai Shu told the Global Times Monday that the company has cooperated with the committee in an "unprecedented" way, noting that "never before has a Chinese company cooperated so extensively with a US congressional investigation."

"We have even provided the list of members in our Party committee," said Dai. Branch organizations of the Communist Party of China are common in many State-owned and private companies in China, even some multinationals like Walmart.

In a statement sent to the Global Times on Monday, Huawei also detailed its cooperation with the panel, saying that the report failed to provide clear information or evidence to substantiate the legitimacy of the committee's concerns.

On September 13, senior executives from both Huawei and ZTE, the second and fifth largest information and communications technology (ICT) providers in the world, appeared at a hearing held by the panel, denying any ties with the Chinese government.

"Despite our best effort, the committee appears to have been committed to a predetermined outcome," Huawei said in Monday's statement.

The panel said the US should even consider extending the authority of a super-secret panel that reviews foreign acquisitions to include purchasing agreements, Reuters reported.

US government systems, particularly sensitive ones, should not include Huawei or ZTE equipment - not even component parts - nor should those of government contractors working on sensitive US programs, it said.

ZTE's Dai said it is unfair for the panel to only investigate two Chinese firms, given that most or all US telecom equipment providers have supply chains in China, including those provided by Western vendors like Siemens and Alcatel-Lucent.

"It's a pity that the panel only focuses on the potential problem, but pays little attention to solutions," said Dai.

According to him, in ZTE's Trusted Delivery Model, which ZTE offers all US carriers, ZTE's hardware and software exported to the US are evaluated by an independent US threat assessment laboratory with oversight by US government agencies to ensure that the country's security is not harmed.

Huawei further noted that the report uses rumors and speculation to prove non-existent accusations.

According to Reuters, the panel said it received credible allegations from unnamed industry experts and current and former Huawei employees suggesting Huawei, in particular, may be guilty of bribery and corruption, discriminatory behavior and copyright infringement.

"We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market," Huawei said.

Xiang Ligang, CEO of telecom industry information portal, echoed the opinion, calling the investigation trade protectionism.

Xiang says  Huawei and ZTE have the most patents in the telecom sector, as well as low labor costs and high-quality talent, making it even harder for other ICT providers to compete with the pair in the US market.

Huawei established its US headquarters in 2001, but has yet to make inroads into the US telecom infrastructure equipment market. Meanwhile, ZTE's US telecom infrastructure equipment sales last year were less than $30 million.

The two firms have encountered obstacles over their expansion in the US market. In 2011, Huawei backed out from its acquisition of US company 3Leaf, as a result of pressure from the Committee on Foreign Investment in the US.

In 2010, US firm Sprint excluded ZTE and Huawei from a multi-billion dollar contract bidding for national security concerns.

Xiang noted that though the congressional report is not legally binding, it would have a long-term impact on the companies' tendering in the US market.

Agencies contributed to this story


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