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Report Suggests Potential for Spying, Stealing by Chinese Tech Companies in U.S.

October 9, 2012 at 12:00 AM EST
Two of the largest telecom companies in the world are looking to expand to the U.S. market. But the House Intelligence Committee has charged that Huawei and ZTE have ties to the Chinese government and run a potential cyber-security risk, recommending their products and services should be avoided. Jeffrey Brown reports.
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GWEN IFILL: A new congressional report takes aim at two Chinese telecommunications giants.

Jeffrey Brown reports.

JEFFREY BROWN: Chinese companies Huawei Corporation and ZTE Technologies for are the second and fifth largest makers of wireless telecommunications gear in the world. And they’re looking to expand their limited sales in the U.S.

But in a 52-page report, the House Intelligence Committee warned Monday against doing business with the Chinese companies, citing concerns over corporate espionage, cyber-war risks and more.

Committee chair Mike Rogers:

REP. MIKE ROGERS, R-Mich., chair of the House Intelligence Committee: The investigation concluded that the risks associated with these companies providing equipment and services to U.S. critical infrastructure undermines the core U.S. national security interests.

As a majority of U.S. networks are run by private companies, we recommend that private network providers find other vendors. Government systems and contractors should also exclude these companies’ products as well.

JEFFREY BROWN: Specifically, the report pointed to possible ties between the companies and the Chinese government and military. And it concluded, based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence.

The conclusions were quickly rejected in Beijing. The Chinese Foreign Ministry insisted the two firms are strictly above board.

HONG LEI, Chinese Foreign Ministry (through translator): China’s telecommunications companies follow the market regulations to operate in the international market. Their investments in the U.S. go to show the mutually beneficial relations.

We hope the U.S. Congress can abandon prejudice and do more to benefit the interest of the two countries, not the opposite.

JEFFREY BROWN: And today China’s state news agency quoted the commerce minister as saying the report “used national security as an excuse for blocking Chinese companies from fair competition in the U.S. market.”

The issue has also entered the presidential race. An Obama campaign ad accused Romney of profiting from a Bain Capital deal that helped Huawei acquire an American company.

The Romney campaign fired back, saying the charge was — quote — “false and ludicrous.”

The congressional report has no legal weight, but it could discourage U.S. telecom firms from major deals with the Chinese.