House Warns on China Telecoms and Cyberspying

by Christopher Freeburn | October 9, 2012 1:24 pm

House Warns on China Telecoms and Cyberspying

A report issued by the House Intelligence Committee warns that Chinese communication equipment makers ZTE and Huawei Technologies are potential securities threats due to their relationship with the Chinese government[1].

According to the report, the Chinese military could plant software in products from the two companies that would allow it to spy on U.S. businesses and government agencies, and possibly gain access to sensitive American technology. The report branded such malware “a tremendous weapon in China’s arsenal” and suggested the companies’ products be kept out of the U.S., Reuters noted.

Both companies have denied they would ever take any such actions.

The release of the report comes as Cisco Systems (NASDAQ:CSCO[2]) announced that it hasĀ ended its seven-year alliance[3] with ZTE after an internal investigation revealed that the Chinese company had sold Cisco equipment in Iran, despite U.S. trade sanctions against the country.

Representatives of ZTE said it was cooperating with a U.S. investigation over the Iranian sales and was “communicating” with Cisco over the partnership’s sudden demise. ZTE has previously denied selling banned equipment to the Iranian government.

U.S. government agencies have been investigating ZTE’s sales in Iran for months. Reports have emerged that some company officials may have attempted to destroy evidence of the sales.

Shares of Cisco slipped fractionally in Tuesday afternoon trading.

Endnotes:
  1. are potential securities threats due to their relationship with the Chinese government: http://www.reuters.com/article/2012/10/09/usa-china-huawei-zte-idUSL3E8L92IY20121009?type=marketsNews
  2. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  3. ended its seven-year alliance: http://www.reuters.com/article/2012/10/08/us-cisco-zte-iran-idUSBRE89709N20121008

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