Europe appears to be readying itself for a major showdown with Huawei and ZTE over trading practices.
According to a confidential EC document obtained by Dow Jones Newswires, the European Union's executive body believes the two Chinese telecoms giants benefit from "massive" credit lines from Chinese state owned banks, plus other significant government support.
Of course, there is a long way between the EC focusing on the Chinese firms' reported trading advantages, and actually taking any kind of action, but it is seeing Huawei, in particular, increasingly gaining ground on homegrown telecoms infrastructure suppliers - Nokia Siemens, Alcatel-Lucent and even leader Ericsson.
Huawei now takes second place in the mobile networks market behind the Swedish giant, while ZTE is in fifth position.
The EC document…sets out the preliminary results of an EC investigation into allegations of unfair Chinese trade practices…sparked by a complaint about modem dumping brought by Belgian firm Option, though the company withdrew its allegations in October after agreeing a joint venture with Huawei focused on dongles and modems.
Although a small German outfit, 4G Systems, has taken up the baton, the EC proposes to close the investigation before it is concluded following Option's decision.
The Commission was able to investigate ZTE, which is publicly listed, more thoroughly than Huawei before stopping the probe, it says, and found the smaller player has access to credit lines of "an enormous magnitude" relative to its annual sales. In 2009, the state-owned China Development Bank and China Export-Import Bank provided ZTE with credit lines worth $25 billion (€18.3 billion) compared with ZTE's revenue that year of $8 billion, which are used for vendor financing.
Huawei has credit facility from the China Development Bank worth $30 billion, among other deals.
"This suggests significant state interference,” the Commission states.
The Commission also raises the thorny issue of whether Huawei and ZTE are controlled by the Chinese government, something both deny vigorously, but which has influenced US policy towards the suppliers.
Original article: Europe puts Chinese trade practices on the table again