Officials of Huawei Technologies and ZTE Corp. defended their companies against allegations of espionage and anticompetitive practices at a hearing before the House Intelligence Committee last Thursday. The appearance of Huawei senior vice president Charles Ding and Zhu Jinyun, ZTE’s senior vice president for North America and Europe, is related to an ongoing committee investigation into the extent to which the two Chinese telecom equipment firms pose a security threat to the United States. Over the past few years, Huawei has emerged as one of the world’s top suppliers of telecommunications network equipment. Although Huawei has sold products to more than a dozen small U.S. rural carriers, Huawei has been rebuffed thus far in its quest to expand its U.S. presence, owing to questions about the company’s ties to the Chinese government and other concerns raised by U.S. officials. ZTE, meanwhile, derives half of its revenue from foreign contracts and, like Huawei, is also seeking to establish a footprint in the U.S. Responding to lawmakers’ inquiries as to whether ZTE has been asked to use its products in such a way as to enable the Chinese government to spy on or to intercept data from U.S. entities, Jinyun told the panel that China “has never made such a request” and that ZTE “would be bound under U.S. law if the Chinese government were to make such a request.” Although committee chairman Mike Rogers (R-MI) noted that both companies have established Communist Party committees at the behest of the Chinese government, Ding countered that U.S. firms such as Wal-Mart and General Motors have also established party committees for their Chinese operations and that these committees have no influence on corporate governance. As both Ding and Jinyun complained that allegations of spying have hurt their companies’ efforts to expand in the U.S., ranking committee member Dutch Ruppersberger (D-MD) suggested that both companies benefit from Chinese government subsidies that enable them to sell equipment at below cost, thereby undercutting rivals. Asserting that “virtually all of the telecom equipment now sold in the United States and throughout the world contains components made, in whole or in part, in China,” Jinyun charged that the committee’s focus on ZTE and Huawei “to the exclusion of the Western telecom vendors, addresses the overall issue of risk so narrowly that it omits from the committee’s inquiry the suppliers of the vast majority of equipment used in the U.S.”
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Executives of Huawei, ZTE questioned at house hearing
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