Huawei, ZTE dispute U.S. security risk allegations

As expected, Chinese telecommunications vendors Huawei and ZTE (Shenzhen: 000063.SZ) vociferously denied that they pose any security threats in the United States and said that a damning report by the House Intelligence Committee is "little more than an exercise in China bashing," as Huawei put it.

And on the other side of the world, the U.S. report, coupled with concerns already voiced in Australia, stirred political turmoil for the incumbent party in New Zealand.

The House committee yesterday released a report that said that the two Chinese firms are too close to their government and may participate in spying, including shipping U.S. company data to China. It urged American companies to avoid working with the Chinese vendors.

A Wall Street Journal story said Committee Chairman Mike Rogers (R-Mich.) cited "numerous" reports of Huawei equipment being used for "suspicious" activities and said the committee was sending its findings to the FBI.

Huawei spokesman William Plummer suggested that the report was nothing more than a way for Americans to bash the Chinese government and that Huawei was simply caught in the crossfire.

"The political agenda was one of poking China in the eye and holding hostage an innocent, independent, employee-owned company," Plummer said in the Wall Street Journal story. "While the report that was issued today (Monday) was quite strong in rhetoric, it is utterly lacking on substance. Huawei unequivocally denies the allegations in the report."

ZTE, for its part, issued a news release that said it was renewing its commitment to work with U.S. government agencies and maintaining that "ZTE's equipment is safe for U.S. telecom infrastructure."

The release also downplayed the report's claims that the vendor has close ties to the Chinese government.

"This finding would apply to any company operating in China," said David Dai Shu, ZTE's global public affairs director. "The committee has not challenged ZTE's fitness to serve the U.S. market based on any pattern of unethical or illegal behavior."

In New Zealand, the U.S. report, coupled with earlier actions by Australia which blocked Huawei from bidding for contracts, ignited a political firestorm. Huawei has been contracted to upgrade New Zealand's broadband network and those in the opposition party think it's time to revisit the issue.

"Now we've got both Australia and America blocking this company over security and espionage concerns. The governments got to take this seriously and put the interest of New Zealanders first," said Green Party member Gareth Hughes in a story reported by Radio New Zealand.

Acting Communications and IT Minister Steven Joyce responded that Huawei is involved in telecommunications projects in more than 100 countries and has "a long involvement with companies like Vodafone (LSE:  VOD.L) worldwide and 2Degrees as well as in this country, so it's not like they're new to the telecommunications business. Different countries take a different view on the risk to their security at different times."

For more:
- The Wall Street Journal has this story (sub. req.)
- ZTE issued this news release
- and Radio New Zealand has this report

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