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Intel Comm. chair: Huawei, ZTE subsidized, security risk

updated 01:08 am EDT, Mon June 25, 2012

Committee investigating subsidies, legal action could follow

The US House of Representatives' Intelligence Committee is looking into the relationship between the Chinese government and Chinese telecom manufacturers Huawei and ZTE. Committee chair Mike Rogers, speaking with Reuters, said he believes it is necessary to look into whether or not the two manufacturers are receiving unfair subsidies from the Chinese government, and whether hardware from the companies could represent a national security threat.

The Committee will likely release a report on the two companies late this summer, both a classified version and an unclassified version. The report is expected to address both trade practices and security concerns with regard to Huawei and ZTE.

Representative Rogers notes that the report could in some ways act as guidance for US companies considering buying telecom equipment. The national security aspect of the report, should it reflect poorly on Huawei and ZTE, could serve to dissuade companies that work with the government from purchasing phones or equipment from the manufacturers.

For the past few months, the Intelligence Committee has been investigating ties between the two manufacturers and the Chinese government. Critics allege that Huawei and ZTE receive cheap loans, land, and other subsidies from China, allowing the companies to dump their wares on foreign markets at prices below what their competitors can afford.

Concerned parties feel it is possible that an increase in the number of cheaply-accessible Huawei and ZTE phones could constitute a security risk. The former US Commerce Secretary, John Bryson, testified in March that Huawei had "capabilities that we may not fully detect to divert information," and ZTE recently acknowledged that its Score handset had a security flaw in the form of a hardwired password allowing anyone with knowledge of it to access any Score device.

For their part, ZTE and Huawei both categorically deny any improper subsidies received from the Chinese government.

The Intelligence Committee investigation is but one of the governmental problems facing the two Chinese manufacturers. ZTE is also reportedly under investigation by the US Department of Commerce over alleged sales of embargoed US computer equipment to Iran. In Europe, the two companies are the subject of an inquiry by the European Commission, which also alleges that they receive improper subsidies from the Chinese government.

by MacNN Staff



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