Relations between the United States and China, the U.S.’ second biggest trading partner, have been cordial but tense. A new report from the House of Representatives Intelligence Committee warning Americans from doing business with two large Chinese telecommunications companies will likely strain relations further.
The Committee, chaired by Mike Rogers (R-MI), spent nearly a year investigating threats to national security posed by Chinese telecommunications companies doing business in the United States. The investigation focused onHuawei Technologies Company and ZTE Corp, two leading Chinese telecommunications equipment manufacturers seeking to expand their presence in the United States.
The American Government’s fear is that both companies are heavily intertwined with, and thus influenced by, the Chinese government. The fear, stressed again and again in the report, is that America would be more vulnerable to Chinese cyber-espionage if Huawei and ZTE come to dominate the supply of telecommunications equipment in the U.S.
The report warns that “[m]alicious Chinese hardware or software implants would also be a potent espionage tool for penetrating sensitive U.S. national security systems, as well as providing access to the closed American corporate networks that contain the sensitive trade secrets, advanced research and development data...that China would find useful in obtaining an unfair diplomatic or commercial advantage over the United States.”
While the investigation turned up no direct evidence that either company was engaged in cyber-espionage, the committee was dissatisfied with what it believed was a lack of transparency and cooperation by Huawei and ZTE. Thus, the committee recommends that the U.S. government, its contractors, and private companies “...should exclude any Huawei or ZTE equipment or component parts.”
Reaction from both companies was swift. In a statement on its website, Huawei stressed that it is a company “no different from any start-up enterprises in Silicon Valley...” and expressed disappointment with what it believes was a biased and protectionist-inspired investigation. ZTE was similarly critical of the report. To allay fears, the company states that it has offered a trusted delivery model as a solution, whereby suppliers would submit their equipment to a third-party for a threat assessment before being implemented. The company states that it fully complied with the investigation and “...believes the Committee focused its examination too narrowly on vendor locations not on equipment security. The Committee omitted the Western vendors and their Chinese manufacturing partners, which provide most of the U.S. equipment now in use.”
With American technology, from the government to large-cap behemoths to start-ups, increasingly reliant on Chinese-manufactured components and software, concerns over vulnerability will likewise grow. As the report itself notes, the telecommunications infrastructure is globally integrated; excluding ZTE and Huawei from the American marketplace may not necessarily address the Committee’s concerns.
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