Huawei and ZTE should not be allowed to do business with US firms and government, according to a congressional committee that said the Chinese telecoms equipment manufacturers posed a security threat.
In a report due for release later on Monday, the US House of Representatives' Intelligence Committee will reportedly say the companies should be barred from mergers and acquisitions in the US, and private American companies should be discouraged from working with them.
The report will likely stymie the firms' growth ambitions — Huawei is the second-largest telecoms equipment vendor in the world, behind Ericsson, and ZTE the fifth-largest. The companies produce kit such as routers and switches for mobile phone operators and ISPs.
Both companies have historically had strong ties with the Chinese state or military, as is normal in that country, and Huawei in particular has long battled accusations that it maintains those connections. The companies have regularly faced suspicions that their equipment might allow monitoring or even remote control by Chinese intelligence services.
Huawei has already been banned from tendering for Australia's National Broadband Network, most likely on security grounds. It has also been barred from taking part in the establishment of an emergency services wireless network in the US.
In the UK, where it is a major supplier to BT, Huawei has established a joint testing centre with GCHQ in order to let the intelligence services study and clear its equipment. The company employs John Suffolk, the former UK government chief information officer, as its global security chief.
It is not yet clear whether the report will refer to the firms' handset businesses as well as their infrastructure businesses. Both companies have for many years been white-label suppliers for operator-branded smartphones, and have recently moved into pushing devices under their own brands.
According to Reuters, Huawei has already hit back by suggesting that it was not "somehow uniquely vulnerable to cyber mischief" and the committee was ignoring "technical and commercial realities". ZTE also said it disagreed with the allegation that it was under the control of the Chinese government.
Although security suspicions are currently focused on the Chinese firms, there have over the years been many allegations made about US technology firms and that country's government. Microsoft has previously been forced to deny involvement by the NSA in the creation of Windows 7, and the FBI has also been constantly pushing for surveillance backdoors to be installed in communications products such as Skype.