Early last week the US House Intelligence Committee went public with its suspicions over Chinese telecommunication hardware companies ZTE and Huawei, accusing both of “posing a national security threat” and discouraging American businesses from buying their equipment. The effect on the companies was immediate, notably with Cisco ending its long-standing partnership with ZTE the next day, with others ready to follow suit.
While ZTE continues to politely offer its own defence against what strikes me as baseless acquisitions, this week the Chinese government weighed in on the issue as well, accusing Washington of betraying its own ‘free market principles,’ and stating that the 52-page report issued by the Intelligence Committee is filled with “groundless and subjective conjecture.”
Representatives for the Chinese government went beyond lambasting the report to stating that if such baseless censure continues against Chinese companies it will assuredly harm the tenuous trade relationship between Beijing and Washington, a veiled threat that the American companies operating behind the Great Wall may soon face similar governmental scrutiny.
As the Intelligence report concluded, neither ZTE nor Huawei were, “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.”
But as David Dai Shu, ZTE’s director of global public affairs, explains, there is something deeply illogical about the Committee resting its conclusions on the finding that ZTE may not be “free of state influence,” arguing that such a finding applies to any company operating in China. According to Shu, the Committee has yet to challenge “ZTE’s fitness to serve theUSmarket based on any pattern of unethical or illegal behaviour,” leaving ZTE feeling like this entire production is nothing more than a communist witch-hunt.
As mentioned, the Chinese government offered its own thoughts on the Intelligence report, with the country’s commerce and foreign affairs ministries both not pulling punches in their response to the serious allegations brought against ZTE and Huawei.
The spokesperson for China’s ministry of commerce, Shen Danyang, said that the Intelligence report “violated [America’s] long-held free-market principles and would undermine cooperation and development between the two countries.” While the statement didn’t give specific details as how the decision would undermine cooperation, Shen went on to say, “We hope the U.S. can make concrete efforts to create a just and fair market environment for the two countries and promote sound development of bilateral economic and trade ties.”
I will admit that I struggle to comprehend such a heavy-handed response from the Intelligence Committee, given that virtually all the telecommunications hardware we use in North America is produced in China. Why only focus on ZTE and Huawei when Chinese telecommunication hardware manufacturers have been operating here for years? While I have yet to discover what’s really going on here, I’m positive there’s more to this story.