China telecom equipment makers deny threat to US security

Huawei, ZTE testify before House intelligence Committee, panel chair says vulnerabilities appear designed into gear.

Reuters September 14, 2012

WASHINGTON: Executives from China's top makers of telecommunications gear denied putting hidden spy code into their equipment at a rare public hearing of the US House of Representatives Intelligence Committee on Thursday.

The officials from Huawei Technologies Co Ltd and ZTE Corp, rejecting fears that their expansion in the United States poses a security risk, said they operated independently of the Chinese government.

The congressional panel is wrapping up a nearly year-long investigation into whether the companies' equipment provides an opportunity for greater foreign espionage and threatens critical US infrastructure.

"We have heard reports about backdoors or unexplained beaconing from the equipment sold by both companies," Committee Chairman Mike Rogers, a Michigan Republican, said in his opening statement.

The committee's report could be followed with proposed measures to exclude their products from the US market if they are determined to be security threats.

The companies, for their part, say they are frustrated by the obstacles such allegations pose to their US business.

"Huawei has not and will not jeopardize our global commercial success nor the integrity of our customers' networks for any third party, government or otherwise," senior vice president Charles Ding said in written testimony.

Huawei and ZTE are fighting an uphill battle for inroads into the United States, stymied by mounting government concerns about economic espionage attributed to Beijing.

US intelligence officials call China the world's most active perpetrator of economic espionage. The keyboard-launched theft of sensitive data has been speeding up, according to a report to Congress last October by the US National Counterintelligence Executive.

ZTE said US sales of infrastructure equipment in the United States accounted for less than $30 million in revenue last year, compared with a combined total of $14 billion by two Western competitors.

Shenzhen, China-based Huawei, which is owned by its employees, is the world's second-biggest telecommunications gear maker after Sweden's Ericsson. ZTE ranks fifth.

Report coming        

Ding and Zhu Jinyun, ZTE's senior vice president for North America and Europe, under oath to the committee, denied putting any back-door channels into their equipment.

Each further vowed that their companies never would bow to a hypothetical Chinese government request to exploit their products for espionage.

"What they have been calling back doors are actually software bugs," Zhu said through an interpreter. Such glitches are not unlike those that require regular software patches from companies like Microsoft, Google and Apple, he said.

The committee aims to wrap up its investigation by the first or second week of October, Rogers told reporters after the hearing.

It plans to publish classified and unclassified versions of a final report that will shed more light on the security concerns, he said, adding that the panel has interviewed many companies.

"Candidly, we have gotten very poor responses" to written requests for documents put to the companies in June, Rogers told reporters.

Party membership

He and the committee's top Democrat, CA Ruppersberger of Maryland, have asked for details about the companies' links to Chinese authorities, their inner workings and pricing strategies for US customers among other things.

"When they don't answer those, it just raises more suspicions," said Rogers, a former FBI agent.

Both Huawei's Ding and ZTE's Zhu agreed at the hearing to send their lists of Communist Party committee members, something the intelligence panel said they had previously declined to do.

Ding complained that Huawei's business efforts in the United States had been hindered by "unsubstantiated, non-specific" security concerns.

He said Huawei has been in touch with US foreign investment authorities and may again try to make a merger or acquisition in the United States. Security concerns of the Committee on Foreign Investment in the United States – an interagency group led by the Treasury Department - had sunk several previous such efforts.

He also argued in a prepared statement that the House Intelligence Committee had sought proprietary business information that "no responsible company, foreign or domestic would voluntarily produce."

Geng Shuang, a Chinese Embassy spokesman in Washington, told Reuters, "We hope the US side could facilitate the investment and economic activities of Chinese enterprise in the US on an equal and fair basis."

On the eve of the hearing, Huawei published a paper on its US subsidiary's website that alluded on its cover page to the Red Scare charges made by Senator Joseph McCarthy during the early 1950s.

"Good public relations," Rogers said in response. "But it doesn't speak to the facts of the investigation." He promised a fair and accurate final report.


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