IBM, Oracle, EMC To Face Probe In China Over Security Concerns: Chinese Media Report

IBM Corp. (NYSE:IBM), Oracle Corporation (NYSE:ORCL) and EMC Corporation (NYSE:EMC) are being targeted in a Chinese government probe over security concerns, Reuters reported on Friday, citing state-run Shanghai Securities News.

The reports follow Edward Snowden's revelations, in June, that the U.S. National Security Agency, or NSA, has been hacking thousands of computer networks around the world for years, including those belonging to China.

On Thursday, the Washington Post had revealed that NSA, as part of its PRISM surveillance program, violated privacy rules thousands of times each year since 2008, when the U.S. Congress granted broader powers to the agency.

There were reports in June that eight major U.S. technology companies, including IBM and Oracle, were identified by Chinese authorities as having “seamlessly penetrated” China, and that distrust was mounting in the country over foreign companies dominating Chinese computer networks.

“At present, thanks to their technological superiority, many of our core information technology systems are basically dominated by foreign hardware and software firms, but the Prism scandal implies security problems,” an anonymous source was quoted as saying by Shanghai Securities News.

Snowden’s disclosures, aside from straining ties between the U.S. and China, also triggered a public campaign against U.S. technology firms in China, according to a report published on July 18 by New York-based Rhodium Group.

“Previously Chinese government objections to US tech firms operating in China were grounded in ideology; now the Chinese authorities and the public are increasingly worried about exposure to US technology and equipment because of espionage,” the report said.

Distrust of foreign technology firms is not limited to China. The U.S. Congress considers Chinese telecommunications-equipment manufacturers, Huawei Technology Co Ltd (SHE:002502) and ZTE Corporation (SHE:000063), as security risks, over several concerns including cyber espionage.

The U.S. Congress flagged Huawei and ZTE after an investigation in October 2012, conducted by Chairman Mike Rogers (R-Mich.) and ranking member C.A. Dutch Ruppersberger (D-Md.) of the House Permanent Select Committee on Intelligence, revealed that the companies' equipment could be used by the Chinese government to spy on the U.S.

However, China’s state-run news agency Xinhua, at the time, alleged that Cisco Systems, Inc. (NASDAQ:CSCO) was behind the allegations mentioned in the report against the Chinese firms.

Michael Hayden, a former chief of NSA, said in July, that Huawei represents a national security threat to the U.S., and “it goes without saying” that the telecom major has spied on behalf of China.