Developing Telecoms | EU investigation asserts that state aid has allowed Chinese vendors to corner Euro market

21 May 2012

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EU investigation asserts that state aid has allowed Chinese vendors to corner Euro market

Monday, 07 February 2011 11:33 | James Barton

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Adding to the objections of European telecoms vendors, a European Commission document has criticised the state financial support received by Chinese vendors ZTE and Huawei.

The document, which has been distributed to various EU governments, details the initial findings of an investigation ordered after Option, a small modem manufacturer from Belgium, accused China of unfair trading.

Although the firm has since backed down on these allegations, the investigation’s results have unearthed information that may lead to its continuation, with the document stating that “several important issues have come to light which remain unanswered.”

Key amongst these issues are the massive lines of credit which Chinese state banks provide to indigenous companies; ZTE’s credit line is described in the document as being of “an enormous magnitude” when its annual sales totals are taken into account.

The document goes on to state: "Such facilities are a major selling point which enables ZTE to clinch deals on its export markets ahead of its competitors such as Option in Belgium, while shifting the entirety or majority of its risk of payment onto the Chinese policy banks."

Having managed to gain ground in Europe swiftly by charging less than their Western counterparts, Huawei and ZTE have considerable power in the European market. However, both firms have stated that they receive no financial support from the state.

Option, which lost the majority of its customer base to the two Chinese vendors, has signed a “cooperation agreement” with Huawei through which it will be paid a maximum of EUR41 million. It has dropped its complaint, but the investigation continues, with a panel of EU trade experts due to discuss the document shortly.

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