If reports are to be believed, the European Commission believes Huawei Technologies Co. and ZTE Corp., China’s largest telecommunications equipment makers, benefit from massive credit lines from Chinese state-owned banks and other significant government support.
The findings are likely to fuel further debate regarding the treatment of the large subsidies that–according to western governments and companies–Chinese businesses receive from the Chinese government. Western trade experts state that Huawei, which has rapidly grown to become the world’s No.2 telecommunications equipment maker, is a compelling example of a Chinese company that has been nurtured to global dominance using such subsidies.
The commission document, circulated to European Union national governments this week, explains that the preliminary results of commission investigations into unfair Chinese trade practises alleged by Option NV, a small Belgian maker of wireless modems. The commission in the document proposes to close the investigations without finishing them, because Option withdrew its complaints in October.
The document concludes that nevertheless, several important issues have come to light which remain unanswered by the major exporting producers of this product.
The major European Union producers of telecommunications equipment–Telefon AB L.M. Ericsson, Nokia Siemens Networks and Alcatel-Lucent–have seen their margins squeezed by stiff competition from Huawei and ZTE. Their rapid growth has prompted discussion among western firms that they are probably benefiting from extensive Chinese government support.
Over the last five years Option saw its share of the EU wireless modem market nearly disappear due to competition from Huawei and ZTE, which now control almost the entire European market.
Wireless modems, which connect computers to wireless Internet networks, are a relatively small business for Huawei and ZTE. The more important market is large network equipment such as Internet base stations for mobile networks–where the two Chinese firms compete with Ericsson, Nokia Siemens Networks and Alcatel Lucent.
The subsidies in question appear to be helping all parts of the Chinese firms’ business.
As per the document, the commission had the opportunity to investigate ZTE more thoroughly than Huawei before stopping the investigations. ZTE states it has access to credit lines of an enormous magnitude relative to its annual sales.
