In the US, the House of Representatives Intelligence Committee released a bipartisan report that concluded that Huawei Technologies and ZTE Inc, two Chinese technology firms, represent a national security threat, noting efforts to obtain sensitive information from American companies and the connections of these enterprises to the Chinese government and military. The full report of the Committee is here. Chinese media have slammed the report, with the state news agency Xinhua calling it “totally groundless”, “based on wild guesses” and motivated by protectionism. “The report laid bare a Cold War mentality as well as protectionism among politicians at Capitol Hill to contain Chinese investments, which could offer new business and job opportunities for the sluggish US economy. Protectionism or anti-market intervention is not a wise choice for Washington.” Huawei and ZTE, which already conduct significant business in the US, also reacted to the report. Huawei’s statement is here, while ZTE’s is here. Read a Wall Street Journal article on their reaction here.
On the eve of the release of the Committee’s report, the US news program 60 Minutes broadcast this report. CBS News posted this additional clip – an interview with Jim Lewis, the director of the Center for Strategic & International Studies (CSIS) Technology and Public Policy Program.
Technology issues have been a major stumbling block in US-China relations. The US maintains restrictions on high-technology exports to China. Beijing has urged Washington to relax the controls to boost trade and address the trade imbalance between the two countries.
Is the House report motivated by election-year politics? Or are there legitimate reasons to be concerned about Chinese enterprises such as Huawei and ZTE because of the limited transparency and their connections to the state? Australia seems to think so. In April, it barred Huawei from investing in the country’s National Broadband Network. Will Huawei and other Chinese companies remain under suspicion, given the corporate governance and disclosure standards in China?
UPDATE: The Obama campaign has wasted no time in using this issue against the President’s election opponent, Mitt Romney: