American companies should avoid doing business with China's two leading technology firms because they pose a threat to the United States, the House Intelligence Committee is warning in a report to be issued Monday.
The panel says U.S.
regulators should block mergers and acquisitions in this country by
Huawei Technologies Ltd. and ZTE Corp, among the world's leading
suppliers of telecommunications gear and mobile phones.
Reflecting
U.S. concern over cyber-attacks traced to China, the report also
recommends that U.S. government computer systems not include any
components from the two firms because that could pose an espionage risk.
"China has the means, opportunity, and motive to use telecommunications companies for malicious purposes," the report says.
The
recommendations are the result of a yearlong probe, including a
congressional hearing last month in which senior Chinese executives of
both companies testified, and denied posing a security threat.
A U.S. executive of one of the companies said the firm cooperated with investigators, and defended its business record. Huawei is a "globally trusted and respected company," said William Plummer, vice president for external affairs.
The
bipartisan report is likely to become fodder for a presidential
campaign in which the candidates have been competing in their readiness
to clamp down on Chinese trade violations. Republican Mitt Romney, in
particular, has made it a key point to get tougher on China by
designating it a currency manipulator and fighting abuses such as
intellectual property theft.
The committee made the draft
available to reporters in advance of public release Monday, but only
under the condition that they not publish stories until the broadcast
Sunday of a CBS' "60 Minutes" report on Huawei. In the CBS report, the
committee's chairman, Rep. Mike Rogers, R-Mich., urges American
companies not to do business with Huawei.
The panel's
recommendations will likely hamper Huawei and ZTE's ambitions to expand
their business in America. Their products are used in scores of
countries, including in the West. Both deny being influenced by China's
communist government.
"The investigation concludes that the risks
associated with Huawei's and ZTE's provision of equipment to U.S.
critical infrastructure could undermine core U.S. national-security
interests," the report says.
The report says the committee
received information from industry experts and current and former Huawei
employees suggesting that Huawei, in particular, may be violating U.S.
laws. It says that the committee will refer the allegations to the U.S.
government for further review and possible investigation. The report
mentions allegations of immigration violations, bribery and corruption,
and of a "pattern and practice" of Huawei using pirated software in its
U.S. facilities.
Huawei is a private company founded by a former
Chinese military engineer, and has grown rapidly to become the world's
second largest supplier of telecommunications network gear, operating in
more than 140 countries. ZTE Corp is the world's fourth largest mobile
phone manufacturer, with 90,000 employees worldwide. While their
business in selling mobile devices has grown in the U.S., espionage
fears have limited the companies from moving into network
infrastructure.
The report
says the companies failed to provide responsive answers about their
relationships and support by the Chinese government, and detailed
information about their operations in the U.S. It says Huawei, in
particular, failed to provide thorough information, including on its
corporate structure, history, financial arrangements and management.
"The
committee finds that the companies failed to provide evidence that
would satisfy any fair and full investigation. Although this alone does
not prove wrongdoing, it factors into the committee's conclusions," it
says.
In Washington, Huawei executive Plummer said Friday the
company cooperated in good faith with the investigation, which he said
had not been objective and amounted to a "political distraction" from
cyber-security problems facing the entire industry.
All
major telecommunications firms, including those in the West, develop
and manufacture equipment in China and overlapping supply chains require
industry-wide solutions, he added. Singling out China-based firms
wouldn't help.
Plummer
complained that the volume of information sought by the committee was
unreasonable, and it had demanded some proprietary business information
that "no responsible company" would provide.
In justifying its
scrutiny of the Chinese companies, the committee contended that Chinese
intelligence services, as well as private companies and other entities,
often recruit those with direct access to corporate networks to steal
trade secrets and other sensitive proprietary data.
It
warned that malicious hardware or software implants in
Chinese-manufactured telecommunications components and systems headed
for U.S. customers could allow Beijing to shut down or degrade critical
national security systems in a time of crisis or war.
The committee concluded that Huawei likely has substantially benefited from the support of the Chinese government.
Huawei
denies being financed to undertake research and development for the
Chinese military, but the committee says it has received internal Huawei
documentation from former employees showing the company provides
special network services to an entity alleged to be an elite
cyber-warfare unit within the People's Liberation Army.
The
intelligence committee recommended that the government's Committee on
Foreign Investment in the United States, or CFIUS, bar mergers and
acquisitions by both Huawei and ZTE. A multi-agency regulatory panel
chaired by Treasury Secretary Timothy Geithner, CFIUS screens foreign
investment proposals for potential national security threats.
Last
year, Huawei had to unwind its purchase of a U.S. computer company,
3Leaf Systems, after it failed to win CFIUS approval. However, Huawei
employs 1,700 people in the U.S., and business is expanding. U.S.
revenues rose to $1.3 billion in 2011, up from $765 million in 2010.
ZTE
has also enjoyed growth in its sale of mobile devices, although in
recent months it has faced allegations about banned sales of
U.S.-sanctioned computer equipment to Iran. The FBI is probing reports that the company obstructed a U.S. Commerce Department investigation into the sales.
The
intelligence panel says ZTE refused to provide any documents on its
activities in Iran, but did provide a list of 19 individuals who serve
on the Chinese Communist Party committee within the company. ZTE's
citing of China's state secrecy laws for limiting information it could
release only added to concern over Chinese government influence over its operations, the report says.
Some guy with a silly name, who I guess I’m supposed to have heard of, 
Long
wait at the airport security line? Savvy travelers know the shortcut:
simply request an airport wheelchair, no proof of disability required!
Life, alas, does not come with an 
A
new Harvard study has discovered a high incidence of vision problems
among men and women who drank three or more cups of coffee a day. The
research, published in Investigative Ophthalmology & Visual Science,
linked heavy consumption of caffeinated coffee with increased
likelihood of developing exfoliation glaucoma, an eye disorder that
affects about 10 percent of adults over age 50 and can lead to vision
loss or blindness.
In
places where malaria is rampant, a common defense is to sleep under a
insecticide-laden mosquito net. The nocturnal mosquito of the genus
Anopheles can't penetrate the netting, and will die from the insecticide
if they try. But malaria rates did not plummet as expected. Did the bed
nets fail? No, the mosquitoes changed -they stopped being strictly
nocturnal and started feeding at dawn, after their human buffets got out
of bed!
