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Chinese Telecoms on West's Blacklist

Stocks in this article: T VZ

TAIPEI ( TheStreet) -- How 1950s is this?

The United States says China's two top telecom firms pose a security risk to America. Members of Congress fear the huge companies might spy for the Chinese government if allowed to do work on U.S. soil.

Last week the U.S. House Intelligence Committee recommended barring China's Huawei Technology and ZTE from contracts or mergers in the United States. A few days later, Canada cited a national security exemption that could block the same from local communications system work. Australia had said in March it would bar Huawei from bidding for work on the country's broadband.

The two Chinese companies suspected of uncomfortably close ties to the Communist regime or its military accuse their Western conspiracy theorists of thinking in the past, i.e. the Cold War, and being full of it today.

But any ban, regardless of its logic, leaves a void. The elimination of Huawei or ZTE from Western markets invites debate about which telecom firms, including a couple in China that weren't blacklisted, might get the jobs.

Lingering on the suspected fellow travellers for a minute, actual business impacts on Huawei and ZTE should be minimal as the two depend now on fat business from runaway domestic infrastructure growth and steady network deals in emerging markets.

Huawei, with its telecom work already used in 140 countries, says it serves more than a third of the world's population and saw 2011 sales revenue of 203.9 billion yuan. ZTE also claims deals in 140 countries, plus the rank of China's largest listed telecoms equipment company.

Slaps against them in the West sting mainly for reputation reasons, as both had been hoping to scale into the developed world. No company, especially publicly traded Chinese ones with international vision, wants to be seen serving home-court political interests.

Huawei says the House committee "failed to provide clear information or evidence" and charges its report, written over 11 months, with supporting a predetermined outcome. "The report released by the Committee...employs many rumors and speculations to prove non-existent accusations," Huawei charges on its Web site.

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