The House of Representatives' Intelligence Committee says the firms "cannot be trusted to be free of foreign state influence," reported Reuters, citing a draft of the report published on Monday.
After 11 months of investigation, the House committee has concluded that there is credible information that the companies' telecom network equipment could be used to spy on Americans on behalf of the Chinese government.
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Huawei issued a statement on Monday responding to the allegations, which the Wall Street Journal reprinted. In it, Huawei accused the committee of making claims that have no basis in facts.
"The report conducted by the House Permanent Select Committee on Intelligence (the Committee), which took 11 months to complete, failed to provide clear information or evidence to substantiate the legitimacy of the Committee’s concerns," the statement said.
It continued, "The report released by the Committee today employs many rumors and speculations to prove non-existent accusations."
The House panel is advising the US government not to use Huawei or ZTE's equipment, US companies not to buy it, and foreign investment regulators not to allow either of the companies to take part in mergers or acquisitions in the US, according to the Wall Street Journal.
The Journal notes that both firms are already present in the US market and have been seeking to expand; they even launched a "major lobbying campaign" to convince Washington that they're not controlled by the Chinese government.
So far it hasn't worked. Last year a US security panel blocked Huawei's acquisition of computer company 3Leaf Systems, the BBC reported, while earlier this year both Huawei and ZTE were summoned before US lawmakers over allegations that some of their equipment had been programmed to relay sensitive information back to China.
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Both companies denied those charges. Responding to the latest allegations, ZTE repeated its statement that it "profoundly disagrees" with the claim that it works for Beijing, while Huawei called the report's suggestions "baseless" and "dangerous political distractions."
China's foreign ministry said that Chinese companies ran their international operations according to business, not political, interests, Xinhua reported.
"We hope the US Congress can respect the truth and overcome biases so as to boost bilateral economic and trade cooperation, and not the reverse," spokesman Hong Lei is quoted as saying.
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