Congress Presses Chinese Telecoms On Spying Accusations

Chinese telecom ZTE has been linked with surveillance in repressive nations. Photo credit Blogee.net via Flickr.

China-based telecommunications companies Huawei Technologies and ZTE Technologies both seek to expand their business in the United States, but Congress has concerns about the cyber-security implications as well as doubts about their commitment to digital rights.

During a hearing of the House Intelligence Committee on Sept. 13, the companies gave little detail beyond general denials when questioned about surveillance on behalf of the Chinese government or connections with repressive regimes such as Iran.

The committee was concerned that the companies’ networking equipment could potentially help the Chinese military or other Chinese government intelligence agencies poach research and other sensitive data from computer systems and mobile networks.

When questioned by committee members the representatives of both telecoms repeated assertions they had not broken any laws in­ the nations where they conduct business, presenting themselves as servants of their shareholders, and maintaining they would never spy on behalf of the Chinese government.

Committee members displayed visible signs of frustration and pressed unsuccessfully for more detailed answers about both companies’ strategies and connections with the Communist Party of China, even though Ranking Member C.A. Dutch Ruppersberger (D-Md.) and other committee members went to China in July seeking similar information.

“I’m a little disappointed in the hearing that they weren’t more forthright in their answers,” said House Intelligence Committee Chairman Mike Rogers (R-Mich.). “There was a lot of repetitiveness, a lot of denial, a lot of ‘this would never happen here.’”

The committee has investigated ZTE and Huawei since November 2011, and Rogers said reports will be completed soon with recommendations on the extent to which the firms should operate in the U.S. Depending on those recommendations Rogers did not rule out legislation to block Huawei and ZTE for certain types of technology sales in the U.S. A precedent was set by Congress in 2008, when it voted to halt a proposed $2.2 billion partnership between Bain Capital and Huawei to buy networking equipment manufacturer 3Com Corp, because of fears that Huawei’s partial control over an American technology company could compromise national security.

“Congress can do a lot of things and it will be up to us to try to determine what best protects our telecommunications infrastructure if we believe there is a threat to both personal business and government information that flows over those networks,” Rogers said.

China is a major technology market for countries unable to buy from the companies in the United States or other Western nations, due to embargoes or reputations for human rights violations. As huge marketers of surveillance technology such as deep-packet inspection technology (DPI), which reads and classifies data as it passes through a network, ZTE was accused of aiding repressive regimes to track, alter or block data using DPI.

This summer the FBI launched an investigation in response to media reports that surveillance equipment sales from ZTE to the Telecommunication Company of Iran included not only its own equipment but also U.S.-made networking equipment, in violation of U.S. sanctions.

Other clients of ZTE have included the surveillance state of former Libyan dictator Moammar Gadhafi. ZTE is also building a $45 million information technology park in Ethiopia, where the government has a record of censoring websites containing information critical of the government.

Senior vice president of ZTE Corporation Zhu Jinyun said his company would not obey any order from the Chinese government t0 compromise U.S. cybersecurity and steal confidential information from U.S. business or government networks. Zhu also denied that his company destroyed documents that were related to an investigation that ZTE resold U.S.-made equipment to Iran despite U.S. trade sanctions against that nation,

“ZTE would never engage in any of the harmful behaviors that you listed,” Zhu said. “As a global and multinational company we abide by all the local laws and regulations of the jurisdictions in which we operate. Like you we condemn those activities.”

Huawei seeks a larger role in the US, as indicated by their presence at tech conventions. Photo credit Interop Events via Flickr.

Although Huawei is not facing allegations of violating U.S. trade sanctions such as those leveled at ZTE, Huawei does have a history of selling to Iran. Despite announcements they would scale back sales to the Islamic Republic, recent reports from U.S. security researchers indicate Huawei surveillance technology is a major component of Iran’s plans for a self-contained national Internet.

Another point of suspicion leveled at Huawei founder Ren Zhengfei is his time serving in China’s People’s Liberation Army (PLA). This is one reason the committee requested a list of current and former staff members in both ZTE and Huawei who had served in the PLA.

Denying accusations that Huawei software installs malicious surveillance code , Charles Ding, corporate senior vice president of Huawei, said there were no such secret backdoors that could allow Chinese government to poach intellectual property. Responding to questions about the presence of the Communist Party of China in his company, Ding said having a communist party committee on the company board is also a legal requirement of China.

“In Huawei, however, I have not seen the party committees participating in any business management or decision making,” Ding said.

While importing tech equipment from a China-based company arouses suspicion from some governments, barring Huawei from bidding on commercial contracts has been criticized as an unprofitable move that is also ineffective for security. Ross Anderson, a professor of security engineering at Cambridge University, stated in The Economist that the approach creates a false sense of security because nearly every telecommunications company buys tech gear from that nation. Linking Huawei with Chinese intelligence has also been cited as a double standard because of the relationships other telecoms have with their governments. For instance, the National Security Agency (NSA) sits on the board of U.S.-based Motorola Solutions.

More audits, reviews and inspections should be expected of every technology vendor, according to a written statement from Ding.

“Since cybersecurity is a global issue that the whole industry has to face, governments and the whole industry should work together to improve cybersecurity,” Ding stated.

Huawei also published a recent report on its operations in an attempt to counter claims that it enables the Chinese government to steal information from networks. These efforts have not convinced Congress, and Rogers said questions directed at Huawei during the investigation received poor responses, and sometimes no responses at all.

“If software is provided by companies we cannot trust we must constantly wonder whether they are being used for us or against us,” Rogers said.

Australia recently blocked Huawei from seeking certain contracts in their country because of the company’s alleged backdoors. Huawei was also accused of illegally copying source code used in switches and routers in a failed 2003 patent lawsuit by Cisco Systems. Another lawsuit by Motorola in 2008 accused Huawei of stealing trade secrets.

If the companies wish to do business in the US, Ruppersberger said the two companies must be clear about any financial or legal liabilities they have with the Chinese government.

“What happens if you are ordered by their government to give information using their equipment?”  Ruppersberger asked.

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  1. […] week on 8 October 2012, the U.S. House Intelligence Committee released an investigative report accusing two major Chinese telecommunications companies, Huawei and ZTE of […]

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