A Congressional panel release a draft report today warning that Huawei and ZTE may be under the influence of the Chinese government.

"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the House Permanent Select Committee on Intelligence said in its report.

Wireless operators and other private-sector companies were warned that using equipment from the vendors posed long-term security risks and "strongly encouraged" to use gear from other vendors.

The report further recommended that Huawei and ZTE be blocked from acquiring U.S. companies and said any proposals to extend the ban to purchasing agreements should "receive thorough consideration" by lawmakers. 

It also said government systems should not include any Huawei or ZTE equipment, and suggested government contractors also exclude gear from the companies in their systems.

Huawei dismissed the report as a "politics exercise."

"This investigation and report are nothing more than a politics exercise that has ignored technical, commercial an cultural realities," Bill Plummer, Huawei vice president of external affairs, said in a statement. 

The report lodges a litany of complaints against Huawei ranging from its alleged ties to the Chinese government to fraud, bribery, discrimination and copyright infringement. A shorter list of grievances against ZTE include research and development projects the may be targeted at infiltrating U.S. systems.

ZTE could not be immediately reached for comment. 

Last week, rumors surfaced that Huawei was considering going public in an effort to become more transparent and increase its chances of landing U.S. contracts. That could be a good move, as today's report said Chinese companies should work to become more open through listing themselves on U.S. stock exchanges, a move that would require them to comply with domestic standards on their financial and operational data.

The report follows testimony by the two companies at a September House hearing on the issue.. The hearing was prompted by an investigation begun last year into security threats posed by the companies, concerns arising from their rumored ties to the Chinese government.

Further investigations could be in the works. The Intelligence Committee recommended Congress take a closer look into unfair trade practices in the Chinese telecommunications market, namely government financial support of "key" companies.