Are Chinese Telecoms Firms Really Spying on Americans?

A congressional committee warned U.S. companies against dealing with two prominent Chinese firms whose products could compromise national security

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J. Scott Applewhite / AP

Executives of two major Chinese technology companies, Charles Ding of Huawei, left, and Zhu Jinyun of ZTE, right, are sworn in on Capitol Hill in Washington on Sept 13, 2012, before testifying whether their expansion in the American market poses a threat to U.S. national security

The charm offensive didn’t pay off. Last month, senior Chinese executives unaccustomed to sharp scrutiny sat in front of a foreign government and tried to explain just what their companies did. But on Oct. 8, after 11 months of study, the House Intelligence Committee recommended that American businesses stay away from computer-network products made by two Chinese firms, Huawei and ZTE, for fear that they may compromise U.S. national security. The world’s second and fifth largest information-and-communications-technology companies have large operations overseas but have failed to expand extensively in the U.S. Now, the U.S. looks like an even more distant destination.

“Based on available classified and unclassified information,” said the U.S. panel’s 52-page report, “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 … Malicious implants in the components of critical infrastructure, such as power grids or financial networks, would also be a tremendous weapon in China’s arsenal.”

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Are ZTE and Huawei victims of the China bashing that has characterized the U.S. presidential campaign? Or is there more going on? The answer is probably a bit of both. President Barack Obama and Republican nominee Mitt Romney seem intent on one-upping each other in showing their tough-on-China street cred. Congress may be simply joining in on the game. But it’s also not hard to believe that these Chinese firms, should they be pressured by their government to do so, may feel compelled to commit a secret, untoward act toward foreign entities in order to protect the growth of their business back home.

Accusing the U.S. panel of engaging in protectionism, Huawei released a statement on Monday:

The United States is a country ruled by law, where all charges and allegations should be based on solid evidence and facts. The [congressional] report failed to provide clear information or evidence to substantiate the legitimacy of the Committee’s concerns … The report released by the Committee today employs many rumors and speculations to prove non-existent accusations.

Chinese analysts have, unsurprisingly, dismissed concerns that the two companies might target the U.S. with cyber-espionage. They point out that Huawei and ZTE have never been caught spying on its global customers or slipping malicious coding into its software. Instead, they counsel more trade and collaboration as the way forward. “If you take China as the enemy, that’s the wrong way of doing things,” says Zeng Jianqiu, a professor at the Beijing University of Posts and Telecommunications, who is also on the Chinese Ministry of Industry and Information Technology’s expert committee for the telecommunications economy. “If America does this, then there’s the possibility that China will do the same thing too.”

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Already, Beijing is irked that Obama stopped a Chinese wind-power company from constructing turbines near a naval installation in Oregon. The wind firm — Ralls, which is a subsidiary of a Chinese heavy machinery maker — is now suing the U.S. President and Treasury Secretary Tim Geithner. Could American tech firms operating in China, from Apple to Cisco, face future hassles?

Huawei and ZTE have tried to differentiate between a government that has a complicated relationship with the U.S. and Chinese enterprises they say simply want to compete in the global economy. ZTE is partly owned by the state, but spokesperson David Dai Shu countered: “It is noteworthy that, after a yearlong investigation, the committee rests its conclusions on a finding that ZTE may not be ‘free of state influence.’ This finding would apply to any company operating in China … ZTE recommends that the committee’s investigation be extended to include every company making equipment in China, including the Western vendors.”

For its part, Huawei says it “is no different from any start-up enterprises in Silicon Valley” and is a Fortune 500 company owned by its employees, according to its Oct. 8 press release. “Huawei is Huawei, Huawei is not China,” William Plummer, vice president for external affairs for Huawei, told reporters, according to the Associated Press. “My company should not be held hostage to someone’s political agenda.” But in China, economics can work hand in hand with politics, too, since the Chinese state makes it its business to guide capitalist enterprises. Huawei’s founder, Ren Zhengfei, once served in the People’s Liberation Army (PLA), and the U.S. congressional committee alleges that Huawei provided network services to a PLA-run cyber-warfare army.

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In that case, Huawei may not be drastically different from American firms like Cisco, whose routers have been used by repressive regimes. Other U.S. firms have given user information to the Chinese government, most notably Yahoo, which handed over e-mail-account records that, in 2005, resulted in a 10-year jail sentence for a Chinese reporter convicted of “leaking state secrets.” Later, after putting up with constantly censored searches in mainland China, Google relocated many of its Chinese services to Hong Kong, where information channels are free.

Of course, there is a big difference between American firms having to acquiesce to local regulations when operating in a foreign country like China and Chinese firms being accused of implanting gremlins in its products that could be activated during a time of war between the U.S. and China. But even on this count, this may not be completely asymmetrical warfare. In 2002, Beijing bought an American-made Boeing 767 for then Chinese President Jiang Zemin. The plane apparently came with some extras, namely nearly 30 tiny spying devices that were scattered throughout the fuselage. One was in the bathroom, another in the headboard of the bed where Jiang would likely have slept.

The larger issue, in fact, may not be one of national security but of trade equity. Despite the wind and telecoms cases, it is far easier for most Chinese companies to do business in the U.S. than vice versa. Many Chinese industries are still protected, and international companies have become more vocal in criticizing the tilted playing field. No charm offensive is on offer from these frustrated foreign firms trying to make it work in China.

— With reporting by Gu Yongqiang / Beijing

MORE: Chinese Hackers Infiltrated U.S. Chamber of Commerce, Claims Report

29 comments
zrlx
zrlx

Haha!Free market?The US government is doing something to protect their enterprise forthe benefits of  some capitalists.And the threat to nation security is just their ridiculous excuse.

Poiuy098765
Poiuy098765

What's wrong with a PLA owned and operated company supplying us communication equipment that transmit a copy of all our signals to Beijing. If we want PRC to own US, we should let them have all our information too.

chillj
chillj

The US is not the only country that has shut this company out, and it should be shut out, if only to advocate for US enterprise.  What company would so depend on its biggest competition for its own product?  Countries should not, either. I wonder what the reaction would be if this were a Mid-east company.

Ivan
Ivan

"The United States is a country ruled by law, where all charges and allegations should be based on solid evidence and facts." Translation: hey..in china we dont have laws...we just have a bunch of snooty human looking dictators who call the shots...why you no do the same, USA

Halvord
Halvord

When my own government stops spying on me, then we'll talk about preventing the PRC.

Poiuy098765
Poiuy098765

I takeityou rather get spied by PRC than Uncle Sam.

Haav Bline
Haav Bline

Of cause it is much better to be spied by a foreign government than by your own, dim wit.  PRC government has no power over you and me, Uncle Sam does.

Halvord
Halvord

Nokia is the real danger. Those crafty Finns!

Gary McCray
Gary McCray

The Chinese already have a well established record for funding and sponsoring computer hacking into the US government and US corporations.

The danger is real and no business in China is immune to the pervasive government pressure and control.

Just because your paranoid doesn't mean they aren't out to get you.

T Marq
T Marq

I'm sure absolutely not, they have made all those technological advancements directly from their Ramp;D efforts. I also believe in Santa, Leprechauns, and the Tooth Fairy.

Katie K. Mercer
Katie K. Mercer

@Yoshi_1:disqus The Chinese are way ahead of us in internet espionage. mŷ ḃėsṫ ḟriėňd's áŭňţ máķės $72 áň ħóŭr óň ţhė çómpŭţėr. shē ħás ḃēēň ŭňēṁplóŷēd ḟór ēiĝhţ móňţhs bŭţ lásţ móňţh hēr páŷ çhēçķ wás $17135 jusţ wórķiňĝ óň ţhē çómpuţēr ḟôr a ḟēw hôurs. Rēád môrē ôň ţhis wêḃ ṡiţê..NDOQESB.Tk

Yoshio Usui
Yoshio Usui

Democracy Tax

There are no Democracy costs for the

Products of China.

The unfairness of trade is the real cause

of the recession.

We need to impose equivalent to the costs

of democracy on all products imported from

Nondemocratic nation CHINA.

This tax is referred to as Democracy Tax.

For all products from China, we should have

China pay Democracy Tax to Democratic nations, because price competition has to

be fair.

Democracy costs too much, and the costs of

democracy such as the election and division of the three powers are added on

all products from toothbrushes to cars.

The cause of the recession and unemployment

lies in the Communist China.

America and the world should introduce

Democracy Tax immediately.

 

Ling Bright
Ling Bright

What you supposed is a tax on thought and exactly described in the book <1984> by George Orwell. The essence of that tax is to charge those who don't act and think as you do. This is what really means regime and dictator. Think about it!

Yoshi_1
Yoshi_1

What Chinese company ISN'T spying on us?

rory2012
rory2012

It is no use for China to keep protesting by words. It's time to put words into action by Chinese government deal with US's nonsense.

firephil
firephil

Oh like Chinese customs puts into action when shipping electronics to Shanghai?  4 months and we are still trying to get our UCS device out of customs. The excuse? (I love it) possible insect infestation. I guess we didn't grease enough palms.

Yoshio Usui
Yoshio Usui

Democracy Tax

There are no Democracy costs for the

Products of China.

The unfairness of trade is the real cause

of the recession.

We need to impose equivalent to the costs

of democracy on all products imported from

Nondemocratic nation CHINA.

This tax is referred to as Democracy Tax.

For all products from China, we should have

China pay Democracy Tax to Democratic nations, because price competition has to

be fair.

Democracy costs too much, and the costs of

democracy such as the election and division of the three powers are added on

all products from toothbrushes to cars.

The cause of the recession and unemployment

lies in the Communist China.

America and the world should introduce

Democracy Tax immediately.

Kant Feng
Kant Feng

shut up japanese

Poiuy098765
Poiuy098765

So Kant lives in the free world, and respect other's freedom of speech, the Chinese way.

Denise Rae
Denise Rae

troll Usui is right. ALL products that are made in China should be hit with a tariff, no exceptions.

Ling Bright
Ling Bright

And the tariff will be imposed on the poor Americans, you must be rich and have a lot of money and use your extra money to buy your own justice and favor.  But who cares the benefit of those fellow Americans under economic struggle and wish for a cheaper product.  

Talendria
Talendria

I didn't even read the article, and I'm going to say yes.  China is definitely spying on us.  They have zero integrity and will do anything to advance their interests.

Rombama
Rombama

Change China for US in your comment, surprise! It makes more sense

snozoid
snozoid

No business in China is beyond the influence of its government and the Chinese government has consistently demonstrated a policy of no limits in pursuing its interests.

It is only a matter of time before China stands as the primary adversary of the United States, both militarily and economically. It would be unconscionably naive for U.S. policymakers to believe otherwise or to open critical infrastructure technologies to Chinese companies.

Talendria
Talendria

Agreed.  It worries me that our government is so technologically ignorant.  The Chinese are way ahead of us in internet espionage.

yuhaiou
yuhaiou

You worried about too much......