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ECONOMICS > US congressional panel plans to probe Chinese tech firms

WASHINGTON - The Associated Press

The House Intelligence Committee is probing Huwai and ZTE Corp. for fears of espionage as the companies try to carve out a bigger niche for themselves in the US

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Chinese Foreign Minister Yang Jiechi, (R) and U.S. Secretary of State Hillary Rodham Clinton attend a press conference at the Great Hall of the People in Beijing China. AP photo

Chinese Foreign Minister Yang Jiechi, (R) and U.S. Secretary of State Hillary Rodham Clinton attend a press conference at the Great Hall of the People in Beijing China. AP photo

U.S. lawmakers yesterday were set to question executives of two major Chinese technology companies as part of a congressional probe into whether those firms’ ambitions to carve out a bigger niche in the American market pose a threat to national security.

The House Intelligence Committee is probing Huawei Technologies Ltd., which was founded by a former Chinese military engineer and has grown to become the world’s second largest supplier of telecommunications network gear. Also under scrutiny is its rival ZTE Corp., which is partly state-owned and is the world’s fourth largest mobile phone manufacturer.

Lawmakers fear the companies could pose an espionage risk. Those concerns have hampered Huawei and ZTE’s expansion in the U.S., particularly beyond selling mobile devices to the provision of network infrastructure. They deny being a security threat. The committee is expected to finalize its investigation in early October.

ZTE welcomes hearing

ZTE says it welcomes the hearing as an opportunity to respond to criticism that associates them directly with the Chinese government and competitor companies. They also want to provide security assurances to enable their entry into the lucrative U.S. network infrastructure market.

“We respect the U.S. government’s security concerns,” ZTE senior vice president Zhu Jinyun said ahead of Thursday’s hearing. “We need to work together to find a solution for those concerns, and this should be our start.”

The committee has requested exhaustive information from both Huawei and ZTE on their ownership structures and connections to the Chinese government and Communist Party, saying it wants to establish if they can truly act as private companies. It has sought details of meetings over the past five years and credit received through state institutions.

That reflects abiding U.S. suspicion over cyberattacks on foreign governments and companies that have originated in China. The Obama administration has sought deeper ties with Beijing, but relations have been strained on security, trade and human rights - issues that Republican and Democratic lawmakers alike often speak out on.

Seeking to allay security concerns, Huawei this month issued a report on cybersecurity that includes a pledge never to cooperate with spying. It says its equipment is used by 45 of the world’s 50 biggest phone companies.

Huawei, however, has released few details about who controls the company, which still fuels suspicions abroad. Australia in April barred the company from bidding to work on a planned high-speed Internet network due to concerns about cyberattacks traced to China. The company had to unwind its purchase of a U.S. computer company, 3Leaf Systems, last year after it failed to win approval from a government security panel.

In Washington, Huawei’s vice president for external affairs, William Plummer, said that because of overlapping nature of global supply chains, addressing the vulnerability of networks required universal standards rather than scrutiny of a single company.

He said Huawei would never compromise the integrity of its customers’ networks - which account for more than 70 percent of its business outside China - as it would be “corporate suicide.”

September/14/2012

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