INTERACTION: Huawei introduces mobile broadband technologies to visitors at 4G World 2010 in Chicago, the United States

The committee, armed with such background, argued, "Analysts in the field hold different views. For example, some of them take Ren as the director of the PLA Information Engineering University, which they believe maintains close links with the PLA GSD (General Staff Department) Third Department. For this reason, Ren may be still in touch with the Chinese military."

Top leaders at Huawei find such speculation to be ridiculous. Since China opened up to the world over 30 years ago, hordes of ex-servicemen and government officials have resigned from their posts to begin new careers. If these conjectures are true, does it mean all the Chinese entrepreneurs maintain close ties with the Chinese Government?

The committee added, "Huawei can't provide detailed information to explain how the Chinese Government normally regulates, controls and supervises it."

"It mirrors the Cold War mentality in the U.S. Congress. Such a mentality will not only affect Chinese firms, but also severely undermine the commercial environment in the United States," said Mei.

On October 9, Shen Danyang, Spokesman for the Ministry of Commerce, announced that the ministry "strongly opposes" the U.S. report, one based on "subjective guesswork" and "false evidence," as it uses national security as an excuse for blocking Chinese companies from fair competition in the U.S. market.

Shen said the move by the U.S. side violated its long-held free market principles and would undermine investment and cooperation between the two countries' companies.

"We hope the United States will make concrete efforts to create a just and fair market environment for companies from both sides and promote the sound development of bilateral economic and trade ties," Shen said.

Motives

For Huawei and ZTE, security concerns over their products have been the largest stumbling block on the path of their American expansion. To tackle the situation, Huawei hired a former American official as its chief security officer, and hoped to win trust through an overseas listing, but to no avail.

Shi Yinhong, a professor at the School of International Studies at Renmin University of China, says Chinese enterprises have been suffering from a lack of trust by the U.S. Government, especially when they try to invest in sensitive areas, a reflection of American concerns over a rising China.

"The American Government is sensitive to Chinese investment in fields which it believes may pose a potential threat to U.S. national security, like energy and telecommunications. The obstacle Huawei and ZTE now face might have been expected because the United States has never lowered its guard against Chinese firms wanting to access its high-tech sector," said Shi.

Jiang Yong, Director of the Economic Security Research Center at the China Institutes of Contemporary International Relations, believes trade protectionism is masquerading as a defense of national security.

"The United States has a long practice of setting up trade barriers against Chinese enterprises. This latest move can be taken as its prolonging protectionist measures adopted after the financial crisis. Now, it also seems to be aggressive and the targets are Huawei and ZTE, both of which have developed by leaps and bounds in the international market," said Jiang.

Political factors aside, Jiang believes Cisco, a Huawei rival, may be the real impediment facing Huawei and ZTE. According to industry statistics, the growth of the global telecommunication market was a mere 12.2 percent in 2011, far less than the 31-percent growth rate registered in 2010. It is widely believed that the eurozone sovereign debt crisis coupled with uncertainties of an economic recovery will lead to further declines in growth. Under such circumstances, Huawei and ZTE, whose products are more competitively priced, are more appealing to customers. According to Cisco's 2011 financial report, the company saw a drop in its gross profit. Price competition from its Chinese rivals is one factor explaining its slackening performance.

Closely connected with the American Government and military, Cisco is an active lobby group. How can it sit by and watch its largest rival possibly make inroads in a market it currently dominates?