TelecomsTech’s Beijing correspondent Dr. Lin Sun says the latest actions against Chinese telecommunications manufacturers reflect an expected continuation of the prevailing U.S. stance toward China and Chinese companies.
This development is clearly damaging for Huawei and ZTE. Regardless of how accurate the allegations may be, the outcome will have broad negative consequences for both companies, likely affecting even European markets. The measures increase barriers to entry in the U.S., particularly among first-tier operators that Huawei and ZTE need to secure major contracts.
Notably, the House statement blends different accusations together. Former and current employees of Huawei have alleged that the company engaged in corrupt practices, including bribery. While such behavior is unfortunately common in many parts of Asia (with some exceptions like Singapore), where informal payments are sometimes seen as a practical way to get things done, it conflicts with Western legal and ethical norms.
These corruption allegations are different from the more serious concern about connections between Huawei and ZTE and the Chinese military or state security apparatus, which pose potential risks to U.S. national security. Conflating corruption claims with national security concerns can make a case seem more persuasive, but they are fundamentally distinct issues.
As I have noted before, neither firm necessarily has overt or covert directives from the Chinese government to pursue a clandestine agenda. However, close ties with a powerful state that exerts extensive control over society naturally invite suspicion—especially where transparency and mutual understanding are limited.
The Chinese government’s pervasive authority creates a business environment that Western observers often misunderstand. This gap in comprehension contributes to mistrust and can lead to harsh accusations. Given this context, it can be difficult for Huawei and ZTE to appear completely free of impropriety in Western eyes; part of the problem stems from systemic differences rather than individual corporate behavior.
Compounding the problem, Cisco recently announced it had terminated a cross-sales agreement with ZTE after discovering that ZTE had sold sensitive Cisco equipment to Iran. In my view, this incident highlights a troubling lapse in ethical judgment. When profit becomes the overriding motive, other considerations—legal compliance, ethical standards, and international norms—can be sidelined.
For Huawei and ZTE, the U.S. market will remain hard to access because they are perceived as potential risks, whether that perception is based on fact or misunderstanding.
The rumors of a Huawei initial public offering might offer some limited relief, but the stigma attached to these accusations could undermine the company’s market value. I expect a cloud to hang over both firms for the foreseeable future unless a significant and convincing shift occurs that demonstrates genuine independence and transparency, allowing them to operate as trusted global companies.
Until such a turning point, Huawei and ZTE are likely to remain in ongoing conflict with Western governments and regulators.