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China hits out at EU subsidies for telecom equipment makers

24 февраля 2011

A study by China's Ministry of Commerce has found the European Union and its member states offered large subsidies to major telecommunications infrastructure companies, which Beijing views as a breach of World Trade Organization rules, a person familiar with the matter told Dow Jones Newswires.

The study, meant for internal distribution, suggests Beijing is ready to seek retaliation against the E.U. if it takes action following its recent investigation that found major Chinese telecom equipment makers, such as Huawei Technologies Co. and ZTE Corp., benefited from significant financial backing from the Chinese government.

The study by the commerce ministry found Brussels and its member countries gave subsidies to European telecom equipment makers by funding research and development projects, and by extending export credits and loans, said the person, who declined to be named.

The E.U. granted research and development funds totaling EUR9.1 billion to three large European telecom infrastructure manufacturers for the 2007-2013 period, the person said, citing the study.

Export credit agencies in Sweden, Finland and France offered guarantees on more than US$35 billion worth of risky loans on non-commercial terms for telecom infrastructure-related projects in the past five years, the person said.

In addition, the European Investment Bank issued over US$2 billion worth of loans on non-commercial terms to three major European telecom equipment makers, the person said, without naming the firms.

The study also showed Nokia Siemens Networks and Telefon AB L.M. Ericsson E.U. were given substantial subsidies by the relevant E.U. member countries, the person said.

An E.U. spokesman in charge of trade matters didn't respond to queries from Dow Jones Newswires on the matter.

"There have always been such subsidies in Europe and the Chinese authorities' latest move is essentially a gesture and a signal of its intention to help Chinese manufacturers obtain a better operating environment in Europe," said Hu Jiaming, an analyst at Capital Securities.

The material impact of the study is likely to be limited, as it won't have any effect on existing E.U. barriers to foreign investment in Europe's telecommunications sector and other strategically important industries, Hu said.

Earlier this month, a European Commission investigation found Huawei and ZTE, China's biggest telecom equipment makers, benefit from considerable Chinese government support, including "massive" credit lines from state-owned banks.

Western trade experts say Huawei, which has rapidly grown to become the world's second biggest telecom-equipment maker by market share after Telefon AB L.M. Ericsson, is a prime example of a Chinese company being transformed into a global player with Beijing's help.

Both Huawei and ZTE have denied receiving subsidies from the Chinese government.

The document from the European Commission, which was circulated to national governments in the E.U., lays out the preliminary results of an investigation into allegations of unfair Chinese trade practices made by Option NV, a small Belgian maker of wireless modems.

The commission proposed in the document that it bring the investigation to a close because Option withdrew its complaint in October.

"Nevertheless, several important issues have come to light which remain unanswered by the major exporting producers of this product," the document concludes.

The margins of European producers of telecommunications equipment such as Telefon AB L.M. Ericsson, Nokia Siemens Networks and Alcatel-Lucent have been squeezed by competition from Huawei and ZTE. Their rapid growth has prompted discussion among Western firms on the level of Chinese government support for the firms.

Источник: Total Telecom

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