The Congressional panel conducted a year long investigation into the working of Chinese telecom giants Huawei and ZTE to see whether they are linked to the Chinese military or government in any way.  While the official word on House Intelligence Committee’s findings is expected on Monday, news agency report widely quoted in the media says the Committee’s conclusions will not bring smile to Beijing. It concluded that the two Chinese biggies do pose a security threat.

US is not the first western nation to express fears of Chinese cyber attacks. That honour goes to Australia, which earlier this year blocked Huawei from bidding for contracts on its US$36.6 billion broadband plan. Within the US, Huawei is already forced to back away from several investments.

If the panel has its way, it will result in a big blow to the Chinese companies which have lined up big plans, since they would be barred from US contracts and acquisitions

The basic thrust of House Intelligence Committee’s case against Huawei and ZTE is that Beijing could use the two firms to undermine US security, and hence cannot be trusted.  In so many words the charge is that with these Chinese telecom giants around, US opens itself to economic or military espionage, or cyber attacks.

‘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’, the House Committee is said to have recorded in its draft report. If these companies operate are used for malicious Chinese hardware or software implants that could serve as a potent espionage tool.

Huawei is present in about 150 markets. So is ZTE. Representatives of the two firms appeared September before the US House Committee. They denied any ties with the government in Beijing or with politics. The committee was not convinced. And it stuck to its preliminary view that China has ‘the means, opportunity and motive to use telecommunications companies for malicious purposes’. Its advice: US government systems, particularly sensitive ones, should not include Huawei or ZTE equipment — not even component parts — nor should those of government contractors working on sensitive US programmes.

If the House Committee view prevails, it will translate into loss of several billion dollars worth business for Huawei and ZTE. Both are already hit by recession at home and in the western market. Based on its investigation, it is asking the US authorities to ‘block acquisitions, takeovers or mergers involving Huawei and ZTE’  It is also asking Obama administration to even consider extending the authority of a super-secret panel that reviews foreign acquisitions to include purchasing agreements.

Appearing on CBS program "60 Minutes", House committee chairman Mike Rogers said he would urge American firms looking at doing business with Huawei to ‘find another vendor if you care about your intellectual property, if you care about your consumers’ privacy, and you care about the national security of the United States of America’.