China's secrecy and close ties with domestic companies justifies a little paranoia on the part of U.S. companies and government agencies planning to do business with Chinese tech companies, experts say.
The trustworthiness of China's tech industry was questioned Monday by a House committee that warned against doing business with Huawei and ZTE, China's leading manufacturers of telecommunications gear and mobile phones. Both companies denounced the findings, with Huawei saying the panel's report was based on "rumors and speculations."
The Intelligence Committee based its conclusion on classified and unclassified information, yet provided no evidence to support their conclusion. Instead, the panel said Huawei and ZTE failed to dissuade lawmakers that their close ties to the Chinese government made it possible for their gear to be used in cyber-espionage.
The companies sell networking gear and mobile phones in the U.S., with Huawei the big player. The company is the world's second largest supplier of telecom networking gear, but only accounts for a sliver of the U.S. market.
Committee chairman Rep. Mike Rogers (R-Mich.) said the panel was most concerned with gear that would become part of public and private network infrastructure. Chris Antlitz, analyst for Technology Business Research, said the possibility existed for China to use Huawei or another company to plant spyware in tech gear.
"The U.S. government, from what I've seen, has not provided any substantial evidence that any equipment from Huawei or ZTE has been compromised, but they keep saying why take the risk, and it is [a risk]," Antlitz said.
Because the committee has not released any evidence, experts don't discount politics as playing a role in the committee's position. Huawei is a competitive threat to U.S. rivals Cisco and Juniper Networks.
"The uncertainty may definitely dampen the market for [Huawei]," Gartner analyst Kathie Hackler said.
Nevertheless, assuming the Chinese government would have access to Huawei's customer list opens the possibility that it could selectively choose which companies or agencies to spy, said Dave Aitel, chief executive of penetration testing company Immunity and a former research scientist for the National Security Agency.
For example, China could decide to plant a Trojan in equipment heading to the State Department, while ignoring orders to small- and medium-size businesses. "It's about the executives and the will of the company to [potentially] behave in that kind of way," Aitel said.
Huawei's ties to the Chinese military are part of its history. Ren Zhengfei, a former military civil engineer and member of the Communist Party, founded the company in 1987. By Chinese law, Huawei is required to have a Communist Party committee within its organization.
Adding to the distrust toward Huawei and ZTE is the overall secrecy of the country's government and company executives, particularly Huawei. Zhengfei shuns appearances on behalf of the company.
In addition, most experts agree that China is home base to a large, active community of hackers engaged in cyber-espionage against governments and private companies.
Because compromised infrastructure gear could pose a national security threat, the House committee had few choices under the current conditions in China. "It's the level of damage that product, security, service or whatever it is could potentially do is the real fear," Anlitz said.