EU-China spat brewing over telecoms subsidies

By Pamela Weaver

An internally distributed study undertaken by China’s Ministry of Commerce reportedly suggests imminent action against the EU for its subsidisation of major telecoms infrastructure companies.

A “person familiar with the matter” has told the Wall Street Journal that China views EU subsidies for telecoms companies as a breach of WTO rules and is ready to retaliate in the event that Europe acts on its recent findings that Chinese giants such as Huawei and ZTE benefit from significant government financial backing.

Earlier this month, the EU Commission distributed findings that Huawei and ZTE are state-controlled and receive cheap government loans that give them an unfair advantage over European competitors. Huawei has strenuously denied the allegations, stating that its receipt of a $30bn credit line from China Development Bank was for customers buying the company’s equipment, not the organisation itself, and therefore complied with OECD standards. ZTE received a $15bn credit line from the China Development Bank and $10bn from the China Export-Import Bank in 2009.

On the other side of the fence, China points to EU research and development grants to telecom manufacturers totalling €9.1bn for 2007-2013 as well as $2bn-worth of loans on non-commercial terms from the European Investment Bank to three unnamed European telecom equipment makers as evidence of European hypocrisy.

The EU report arose from a complaint last year by Belgian wireless device manufacturer Option that has since been withdrawn, following an agreement with Huawei last October. The EU has proposed dropping the case, stating in a document issued to member-state governments that “It would be disproportionate to continue the investigation and impose measures following the withdrawal of the complaint.” Whether the Chinese government will feel the same about its findings on European big-guns such as Nokia and Ericsson remains to be seen.