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Chinese telecom firms blocked in the U.S.

The two big Chinese telecom companies, Huawei and ZTE, will be unable to do business in the United States after a congressional report released last Monday revealed that they can pose national security risks.

Huawei and ZTE, second-largest and fifth-largest makers of routers and networking equipment respectively, have been found to be potential threats to the integrity of United States communication infrastructure, according to the report.

The United States House of Representatives’ Intelligence Committee urged Americans to stop doing business with the two companies because China could use the equipment  produced by two companies  to spy on communication activities of the country as well as threaten critical systems through computerized connections.

Internet service providers and other vendors are told to use alternate products on their projects.

The panel advised the Committee on Foreign Investments in the United States, a mix of government agencies that vets deals from other countries for security concerns, to avoid any business mergers either ZTE or Huawei and any United States businesses.

The findings of the panel come at a sensitive time when the United States is about to elect a new president and China about to transition to a new leadership.

Tensions between the two countries have been increasing lately as the United States implemented a series of trade sanctions against China, including President Obama’s blocking of a privately-owned  Chinese company from constructing wind turbines near a U.S. Navy missile-testing facility, as well as challenging the Chinese auto industry in the World Trade Organization. The Republicans led by Mitt Romney is neither sympathetic as he vows to label China a currency manipulator from day one if elected.

Analysts like Ed Snyder of Charter Equity Research believe that the panel’s announcement could trigger a harsh response from China. He thinks that companies selling wares in the telecommunications business and others will be hit hard. Some of the companies that will take be potentially retaliated upon will be Qualcomm, Apple, Google, and Cisco, to name a few. Some non-tech companies can also be targeted.

Huawei had initially urged the United States government to investigate its presence in the country to remove suspicions that its linked to China’s military. Huawei tried to bid for a United States communications company 3Com and U.S. server company 3Leaf.

Committee Chairman Mike Rogers said that undisclosed American users of Huawei routers told the committee that their equipment sends unauthorized amounts of data to China late at night.

Apparently, the committee’s document cannot provide enough evidence but it seemed decided enough to voice their concerns anyhow. It also urged the Department of Homeland Security and the Justice Department to investigate Huawei for possible corruption and bribery cases, copyright infringement, and discriminatory behavior.

The main concern of the committee seemed to focus on the fact that both Huawei and ZTE do not only present a security risk to the country’s communication infrastructure, but also because they are the two largest Chinese-owned and funded companies looking to sell vital networking infrastructure in the U.S.

source: reuters