Report hurts long-term trade prospects

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Much of the House committee's claims stem from the Chinese companies' links to the People's Liberation Army and the central government in Beijing, as well as complaints that it has stolen technology from competitors.

However, Huawei has said when founder Ren Zhengfei set up the company in 1987, he had already left the PLA.

In May, a congressional delegation that included some members of the Intelligence Committee made a fact-finding trip to China, where they met with the chairman of Huawei's board of directors and officials from ZTE. Both companies are based in Shenzhen, a manufacturing hub in southern China.

Clif Burns, a lawyer in the Washington office of Bryan Cave LLP who specializes in export controls and economic sanctions, points out that the report reiterates general accusations about the two companies but doesn't present evidence supporting the claims.

Burns described the report as a "two-man" draft of a document that struck him as "very odd". The report doesn't state whether its conclusions were endorsed by any of the other 18 members of the committee.

"I think it's a publicity stunt," Burns says. "I don't think anybody is going to stop dealing with Huawei and ZTE because of this, nor should they."

Huawei's US spokesman, William Plummer, told reporters in Washington the day after the report's release that the committee's recommendations to block Huawei and ZTE's access to deals or business opportunities could set "a monstrous market-distorting precedent which could be used against American companies doing business overseas".

The report is the latest in a series of recent US moves that have caused trade frictions with China.

In late September, President Barack Obama cited national-security concerns to block Ralls Corp, owned by executives of China's Sany Heavy Industry Co, from buying four wind farms near a US Navy testing site in Oregon. It was the first time in 22 years that a US president had barred a foreign investment in the country.

In early September, while campaigning in Ohio, Obama announced a trade complaint against Chinese automakers and auto-parts suppliers, which many saw as part of an effort to appeal to voters in a crucial "swing" state in the Nov 6 election.

The president's Republican challenger, Mitt Romney, has accused China of forcibly keeping down the value of its currency to make Chinese exports cheaper. Romney has promised to label China a "currency manipulator" on his first day in office if elected president.

Regardless of the timing, the actions and rhetoric could harm both countries' economies.

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