US Names Huaiwei, ZTE National Security Threat

Chinese telecom firms Huawei and ZTE pose a security threat to the US, a congressional panel has warned after an investigation into the two companies.

The two firms should be barred from any mergers and acquisitions in the US, the panel has recommended in its report set to be released later on Monday.

It said the firms had failed to allay fears about their association with the Chinese government and military.

The two are among the world's biggest makers of telecom networking equipment.

“China has the means, opportunity and motive to use telecommunications companies for malicious purposes,” the committee said in its report.

“Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems.”

Both Huawei and ZTE have previously denied the allegations.

China's Foreign Ministry urged the US to "set aside prejudices" regarding the two firms.

“Chinese telecoms companies have been developing their international business based on market economy principles,” ministry spokesman Hong Lei said.

“Their investment in the United States embodies the mutually beneficial nature of Sino-American economic and trade relations.”

Espionage fears

Huawei was started by Ren Zhengfei, a former member of the People's Liberation Army, in 1987.

As the firm has grown to become one of the largest global players in the sector, fears about its ties with the Chinese military have frequently surfaced.

There have been concerns and allegations that it was helping China gather information on foreign states and companies, charges that the firm has denied.

Last year, its purchase of American computer company 3Leaf systems, was rejected by a US security panel.

Earlier this year, it along with ZTE, faced allegations that some of their equipment had been installed with codes to relay sensitive information back to China.

Senior executives from the two companies denied those allegations when they appeared before US lawmakers in September.

Political distraction?

This latest report comes in the midst of a US presidential campaign in which China has become a political hot topic.

Both President Barack Obama and his Republican challenger Mitt Romney have pledged to increase the pressure on Beijing on issues ranging from China's currency policy to state subsidies for Chinese firms.

Earlier this month, Mr Obama signed an order blocking a deal by a Chinese firm, Ralls Corp, to acquire four wind farm projects near a US naval facility in Oregon.

It was the first foreign investment to be blocked in the US for 22 years.

The Chinese firm has since sued Mr Obama, alleging the US government overstepped its authority.

William Plummer, Huawei's vice-president, said the latest accusations against the telecom firm were politically motivated.

“The integrity and independence of Huawei's organization and business practices are trusted and respected across almost 150 markets,” he was quoted as saying by the AFP news agency.

“Purporting that Huawei is somehow uniquely vulnerable to cyber mischief ignores technical and commercial realities, recklessly threatens American jobs and innovation, does nothing to protect national security, and should be exposed as dangerous political distractions.”

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