The US strained its trade ties with China today when the house intelligence committee warned firms not to do business with Chinese tech giants Huawei and ZTE.
A new report by the committee tells regulators to block "mergers and acquisitions" by the companies, two of the world's biggest telecoms firms, as they pose "a national security risk."
It claims: "China has the means, opportunity and motive to use telecommunications companies for malicious purposes."
It is likely to prompt President Barack Obama and Republican challenger Mitt Romney to compete to be the most hawkish on China.
China's economic performance and large purchases of US government debt make it a popular scapegoat for the country's economic woes.
Both firms denied posing any security risk.
Chinese Foreign Ministry spokesman Hong Lei said he hoped the US would do more to benefit mutual interests rather than "the opposite."
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