Beijing on Monday urged Washington to "set aside prejudices" after a draft Congressional report said Chinese telecom firms Huawei and ZTE were security threats that should be banned from business in the US.

"We hope the US Congress will set aside prejudices, respect the facts, and do things that will benefit China-US economic cooperation instead of the contrary," said foreign ministry spokesman Hong Lei.

The draft report by the US House Intelligence Committee, obtained by AFP, said an investigation has concluded that the two firms "cannot be trusted" to be free of influence from Beijing and could be used to undermine US security.

It said US authorities "must block acquisitions, takeovers or mergers involving Huawei and ZTE given the threat to US national security interests".

The panel launched its probe over concerns that China could use the fast-growing firms for economic or military espionage, or cyber attacks.

Hong, however, defended the Chinese telecom firms.

"China's telecom enterprises have been engaged in international cooperation according to market economy rules and their investment has demonstrated the mutually beneficial nature of China-US economic ties," he said.

The probe comes amid rising overseas concern over whether big firms in China are linked to the military or government.

Australia earlier this year blocked Huawei from bidding for contracts on its Aus$36 billion (US$36.6 billion) broadband plan due to fears of Chinese cyber attacks.

In the US, Huawei was forced to back away from several investments amid pressure from Washington.

Both Huawei and ZTE have previously denied any ties with the Chinese government.

Huawei reiterated that position in response to queries.

"The integrity and independence of Huawei's organisation and business practices are trusted and respected across almost 150 markets," Huawei vice president William Plummer said in an emailed statement.

"Purporting that Huawei is somehow uniquely vulnerable to cyber mischief ignores technical and commercial realities, recklessly threatens American jobs and innovation, does nothing to protect national security, and should be exposed as dangerous political distractions."

ZTE did not immediately respond to requests for comment.