Fear-mongering or justified skepticism? How do we begin to parse the US House Intelligence Committee report, released Monday after 11 months in the works, that claims China’s two biggest telecommunications makers “pose a security threat to the United States,” and that the US “should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies”? As the Associated Press bluntly tells it:
The panel says U.S. regulators should block mergers and acquisitions in this country by Huawei Technologies Ltd. and ZTE Corp, among the world’s leading suppliers of telecommunications gear and mobile phones.
Reflecting U.S. concern over cyber-attacks traced to China, the report also recommends that U.S. government computer systems not include any components from the two firms because that could pose an espionage risk.
“China has the means, opportunity, and motive to use telecommunications companies for malicious purposes,” the report says.
That doesn’t sound very nice. And while the tone is slightly paranoid, America takes its security way too seriously to care about offending a couple of Chinese companies — or, for that matter, China.
How would Huawei and ZTE potentially do harm? As The Verge puts it:
Presumably, the fear is that Huawei and ZTE will could somehow build backdoors into their routers and switches, leaking sensitive information to Chinese government and industry. The report also found “credible” reports of immigration violations, bribery, and corruption at the two companies, reports Bloomberg.
Obviously Huawei and ZTE are denying and dismissing. According to The Verge again, “ZTE points out that its US sales are so small ($30 million) as to be insignificant from a security standpoint, and argues that the Committee should broaden the scope of its investigation to include ‘larger Western vendors.’”
Of course, they’ll have a difficult if not downright impossible time convincing anyone. And judging by the report, it seems their major sin was simply not trying hard enough to be convincing:
Despite hours of interviews, extensive and repeated document requests, a review of open-source information, and an open hearing with witnesses from both companies, the Committee remains unsatisfied with the level of cooperation and candor provided by each company. Neither company was willing to provide sufficient evidence to ameliorate the Committee’s concerns. Neither company was forthcoming with detailed information about its formal relationships or regulatory interaction with Chinese authorities. Neither company provided specific details about the precise role of each company’s Chinese Communist Party Committee. Furthermore, neither company provided detailed information about its operations in the United States. Huawei, in particular, failed to provide thorough information about its corporate structure, history, ownership, operations, financial arrangements, or management. Most importantly, neither company provided sufficient internal documentation or other evidence to support the limited answers they did provide to Committee investigators.
So now we wait: for the analysis, the fallout, and the use of the report as election fodder. In the meantime, check out Sunday’s episode of 60 Minutes (transcript here), which attempts to explain, in simple and reductive news magazine terms, what all this means to the American public:
Steve Kroft: How did they get so big and so cheap, so quickly?
Jim Lewis: Two answers. First, steady, extensive support from the Chinese government. If you’re willing to funnel hundreds of millions, maybe even billions of dollars to a company, they’re going to be able to grow. The second reason is industrial espionage. And Huawei was famous in their developing years for taking other people’s technology.
Steve Kroft: You mean stealing?