Canadian Manufacturing

Chinese tech firms face congressional probe over espionage risks

Those concerns have hampered Huawei and ZTE's expansion in the U.S., particularly beyond selling mobile devices

WASHINGTON—U.S. lawmakers are questioning 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 telecoms 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.

Thursday’s hearing might also raise with ZTE alleged sales of banned U.S.-sanctioned computer equipment to Iran. The company is facing a Commerce Department investigation into such sales, and the FBI is probing allegations the company obstructed that investigation.

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 U.S. suspicion over cyber attacks on foreign governments and companies that have originated in China.

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

On Tuesday, Huawei’s founder, Ren Zhengfei, met with British Prime Minister David Cameron and announced plans to invest $2 billion to expand its operation in Britain.

Huawei, however, has released few details about who controls the company. Australia in April barred the company from bidding on a planned high-speed Internet network due to concerns about cyber attacks traced to China.

Huawei 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.

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