January 21st, 2011
04:22 AM GMT
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New York (CNN) – “We are very concerned that these companies are being financed by the Chinese government and are potentially subject to significant influence by the Chinese military.”

The accusation leveled against two Chinese telecoms firms – ZTE and Huawei – in a letter published by some U.S. lawmakers last October.  It was designed to undermine a lucrative deal with a U.S. telecommunications company and illustrates the unease and suspicion still present as Chinese President Hu Jintao begins the last day of his high-profile visit to the U.S.

Today, ZTE – the world's fifth largest telecommunications equipment maker – is still pressing ahead with attempts to expand in the United States. But the experience has clearly left its mark on Lixin Cheng, the company’s CEO for North America.

“In the U.S., the fundamental principle is a free economy, free market and a free country,” he told CNN at the firm’s U.S. headquarters outside Dallas. ”Surprisingly I learned from the press that for some projects the government intervenes. I do not believe that should happen.”

Cheng has lived in the United States for ten years, first moving with Swedish telecoms firm Ericsson. And it’s his chosen area of expertise which is proving a flashpoint: The lawmakers say the sensitive nature of the U.S. telecommunications network is vulnerable to espionage. The Pentagon tells CNN they remain concerned about China’s cyber capabilities.

“We're not coming here trying to be a spy,” Cheng said. “We want to be part of the local community and fully comply with all of the regulations and requirements.”

The company says it has made its coding available to a 3rd party audit and – as the United States struggles with stubborn unemployment – can promise jobs. A manufacturing plant is planned. But it comes as Washington grows increasingly wary of the Chinese military, which has historic links to technology companies in China.

State-owned entities do still own a 16% stake in ZTE, but the company denies any influence from the government or military.

This tension between liberal trade and U.S. national security is hardly new: In 2006, the UAE-based Dubai Ports World applied for the management contracts of six U.S. seaports as part of a takeover deal of a British shipping company.

President George W Bush supported the move, pointing out that Dubai was an ally of the United States in the War on Terror. But it triggered a firestorm of controversy, as U.S. lawmakers maintained national security would be compromised.

DP World eventually withdrew their bid and has no presence in the United States. ZTE is growing and is remains optimistic.

“I think the only challenge I see is that people didn't know us enough,” Cheng said. “So we come here today, to talk with you.”

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soundoff (20 Responses)
  1. Todd Wu

    As a Chinese who is living in China, I will just go ahead and warn you that Chinese business people and politicians CANNOT be trusted. These are people who would poison baby formula, coat toys with lead, and build schools ready to collapse. There is no premium on truth in Chinese culture. To think the Chinese will spare America is utter naivity. They even have commenters here on CNN forums paid by the Chinese government to hide the truth.

    January 21, 2011 at 9:17 am |
  2. Lincoln

    Mr. Chen should not be surprised to see governments interfering in business. Just look over his shoulder to his Chinese bosses. Any US company that wishes to trade in China needs to have a Chinese partner, preferably some Chinese government officer. Why the US should not do the same to Chinese companies? Business should be like diplomatic relations. If some country expels a US diplomat, we expel one of them. If the Chinese agree to a real free market on their country, then they would have free market in the US for their companies. It is widely known that Chinese companies profit from all ways to steal technology and are intercepting email communications when they can. The US needs definitely to keep an eye on them. No need to force Chinese companies to accept the US government as their shareholder, as Chinese do to US companies in China. Just name an auditor with full powers for every Chinese company in the US. Meanwhile, better the US government wake up, if they want to preserve the nation from economic decline. The present economic and trade policy of the US can also be named “suicide”.

    January 21, 2011 at 9:24 am |
  3. JC.YIN

    so, it seems that U.S lawmakers are a whole bunch of hypocrites. On the one hand they accuse China of "protectionism" and "favoring indigenous companies" whilst on the other, they do the exact same thing themselves. No wonder Chinese leaders only pay lip service these days to their requests.

    If ZTE isn't allowed to expand business in the U.S for fears of "security", then why should China allow U.S firms such as Motorola or any other U.S tech company to expand in China? We can also play the "security" card, saying these companies can be used by the U.S government to spy on China.

    Another hypocritical act by U.S lawmakers? Lambasting China for not doing enough to contribute to better "environmental protection" but at the same time bashing China for subsidizing green industries. On the one hand they accuse China of not doing enough to engage in renewable energy development but when China starts to subsidize green energy (wind power, solar power etc), they accuse us of "protectionism" and "subsidizing"...... seriously U.S lawmakers need to get a healthy dose of reality. They're actions are so contradicting each other.

    January 21, 2011 at 9:37 am |
  4. Manuel Vilhena

    ZTE is just doing business and I have nothing against it.

    January 21, 2011 at 10:02 am |
  5. Embu

    Why do they want to rush things? They should allow themselves to grow gradually, otherwise anyone will be worried about the motive behind.

    January 21, 2011 at 10:42 am |
  6. MajorTso

    Never trust these two companies. They'll lie through their teeth, steal our talent and intellectual property. They are master market manipulators.

    January 21, 2011 at 11:11 am |
  7. Julian Constantine

    It is clear that the rhetoric does not match the facts. Chinese military expansion is moving apace and with 300million men of service age available represents an awesome threat. Can one really believe that ZTE is not part of E-warfare development strategies. We have been led to a point where protectionism is a dirty word but it is fully practised by China, where as was pointed out 16% of ZTE is owned by the PLA. Our economies have been laid waste by antiprotectionist policies that have allowed China with it's virtual slave labour workforce to swamp our home industries in almost every area, let them in and you will have no other provider within a few years, then what?

    January 21, 2011 at 12:22 pm |
  8. Abu

    The USA does not want the Chinese investment. China, please put your money in Europe. Europe welcomes you with open arms.

    January 21, 2011 at 3:41 pm |
  9. Jack Caine

    I come in peace. You go in pieces.

    January 22, 2011 at 12:00 am |
  10. IE

    Not sure what you mean. It's not protectionism for businesses to stick with a certain vendor. It helps them develop products without bankrupting the vendors in the process. They work together instead of running off to other vendors (but they try to pick world class vendors also). You know all of that stuff, right? from engineering classes?

    I think you are right that they don't know each other very well.

    January 24, 2011 at 10:46 am |
  11. IE

    I also agree that it is a security threat to the U.S. Are they selling handsets to walmart or something? Can't tell much from this article.

    January 24, 2011 at 10:52 am |
  12. IE

    Corporations think they are "people" now. That never settles very well with me. Does it mean that corporations, or even special interest groups, from other countries can get into our government that way? With a LOT more money than any of us would have. And not only that, but they aren't required to tell us where the money is coming from (campaign contributions), or if they start some seemingly wonderful front organization to be a trojan horse. Homeland security really should make laws to protect our country from corporations.

    January 24, 2011 at 10:56 am |
  13. IE

    Homeland security should protect the U.S. from corporations and agents in our country that act in the best interest of a different country over ours (case in point – pro-israel lobby groups). perhaps there are others. but...we seem to be seeing cases where our government can be bought. so...that's a problem.

    January 24, 2011 at 10:59 am |
  14. Bernie D.

    I beg to disagree with Mr. Cheng's comment "people didn't know us enough". On the contrary, I'm glad American people are now starting to realize the real nature of Chinese people, especially the Communist Chinese government, that they are never to be fully trusted. I'm a naturalized American who originally came from a Southeast asian country, so I know a thing or 2 about Chinese people. Bottom line, don't trust Chinese even when they seem to be friendly. Their sense of fair play is totally different from the West and they also want to dictate on small countries around them.

    January 24, 2011 at 9:43 pm |
  15. Howard

    Simple. Invite a famous chinese dissident as the CEO of ZTE USA. Then the whole US government will brace ZTE with warm arms.

    January 27, 2011 at 7:52 am |
  16. johnlawrance

    Who would trust anyone with millions of dollars let alone a corrupt Government?

    January 28, 2011 at 3:25 am |
  17. General Tso

    Todd is correct...

    February 15, 2011 at 11:27 pm |
  18. John

    Americans are paranoid hypocrites.

    February 16, 2011 at 1:34 am |
  19. icon pack

    So will not go.

    October 8, 2012 at 1:48 am |

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