WASHINGTON — The House Intelligence Committee recommended Monday that U.S. companies should be blocked from carrying out mergers and acquisitions involving two Chinese telecommunications firms, saying their equipment could be used for spying in the United States. The recommendations, the result of a yearlong investigation, also said the U.S. government should not use equipment from the companies, the giant Huawei Technologies and ZTE Inc., and that U.S. companies should find alternative suppliers as well.
A report on the inquiry described the companies as a “national security threat" to the United States, saying that the committee had obtained internal documents from former employees of Huawei that show it supplies services to a “cyberwarfare" unit in the People’s Liberation Army. The committee said the U.S. government should go through the federal Committee on Foreign Investment to carry out its recommendations to block any business or other transactions involving the Chinese companies.
The report was presented by Rep. Mike Rogers, R-Mich., the chairman of the House Intelligence Committee, and Rep. C.A. Dutch Ruppersberger of Maryland, the top Democrat on the committee.
Huawei denies being financed to undertake research and development for the Chinese military, and its executives have repeatedly insisted that they have nothing to hide. The company issued an open letter to the U.S. government in February 2011, asking to be investigated so as to clear up what the company characterized as misperceptions about its history and business operations.
At a news conference, Rogers and Ruppersberger said they told the Chinese companies that they had to be more transparent but were disappointed by incomplete and contradictory responses to their questions. Rogers said the committee was concerned that the companies were extensions of the Chinese government because they were so heavily financed by it.
In a statement released at the time scheduled for the start of the committee’s news conference, Huawei condemned the committee’s investigation and report. The company said it had tried for 11 months to work with the committee, but that the committee had proceeded on a predetermined track anyway.
“Unfortunately, the committee’s report not only ignored our proven track record of network security in the United States and globally, but also paid no attention to the large amount of facts that we have provided," Huawei said in its statement, later adding that, “the report released by the committee today employs many rumors and speculations to prove nonexistent accusations."
ZTE said in a statement Monday in China that while it had not yet seen the report, it had told the committee in April that it was “China’s most independent, transparent, globally focused publicly traded company."
The company said its equipment was “evaluated by an independent U.S. threat assessment laboratory with oversight by U.S. government agencies," and added that “most or all U.S. telecom equipment is made in China, including that provided by Western vendors."
