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Huawei, ZTE pose risk to US national security, claims report

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The Huawei Ascend P1 S
Chinese technology giants Huawei and ZTE pose a threat to US national security and should be blocked from making any mergers or acquisition in America, a congressional panel has warned following an 11-month investigation into the two firms.

In a report set to be released today, the panel said that employee-owned ZTE and unlisted Huawei had not shown categorically that they were free from association with the Chinese government or military.

Huawei is the second biggest maker of telecoms networking technology behind Sweden's Ericsson, and has more recently pushed into consumer electronics with smartphones and tablets.

In the global smartphone market, ZTE is the fifth largest brand and Huawei the sixth.

According to Reuters, both firms make only a tiny fraction of their income in the US - Huawei 4% and ZTE 2-3%.

But the US House of Representatives' Intelligence Committee said in its report: "China has the means, opportunity and motive to use telecommunications companies for malicious purposes.

"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems."

Huawei and ZTE have previously denied any such allegations.

In September, ZTE and Huawei both appeared in front of US lawmakers to deny claims that some of their equipment had been installed with codes that relayed sensitive data back to China.

Huawei - founded by a former member of the People's Liberation Army in 1987 - was blocked in its proposed purchase of American computer company 3Leaf systems last year by a US security panel. The firm has faced accusations that it has ties to the Chinese military.

However, China's foreign ministry has called on the US to "set aside prejudices" regarding the two companies.

"Chinese telecoms companies have been developing their international business based on market economy principles," Chinese ministry spokesman Hong Lei said.

"Their investment in the United States embodies the mutually beneficial nature of Sino-American economic and trade relations."

According to AFP, Huawei vice president William Plummer claimed that the accusations against his firm were politically motivated.

"The integrity and independence of Huawei's organisation and business practices are trusted and respected across almost 150 markets," he was quoted as saying.

"Purporting that Huawei is somehow uniquely vulnerable to cyber mischief ignores technical and commercial realities, recklessly threatens American jobs and innovation, does nothing to protect national security, and should be exposed as dangerous political distractions."

The report is being released in the midst of the US presidential campaign, in which concern over the impact of China's massive economic growth on US jobs is becoming a key campaign issue.

President Barack Obama and Republican challenger Mitt Romney have both pledged to increase the pressure on China over its trade and industry policies.

This month, Obama blocked a proposed a deal by a Chinese firm, Ralls Corp, to buy four wind farm projects near a US naval facility in Oregon. This was the first foreign investment deal blocked in America for 22 years.

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