June 16, 2011 / 9:05 PM / 8 years ago

Huawei rejects Eximbank chief's China aid claim

WASHINGTON (Reuters) - Chinese telecoms equipment manufacturer Huawei Technologies HWT.UL on Thursday rejected a U.S. government official’s suggestion that its rapid growth was due to Chinese government financial aid.

A Huawei plant is lit by a setting sun in the southern Chinese township of Longhau in Guangdong province August 18, 2010. REUTERS/Bobby Yip

“It is fundamentally and utterly incorrect,” said Bill Plummer, vice president of external affairs for Huawei.

He was responding to a comment by U.S. Export-Import Bank President Fred Hochberg on Wednesday that one reason Huawei’s “growth has been so dramatic is that it’s backed by a $30 billion credit line from the Chinese Development Bank.

“This backing allows Huawei to significantly reduce its cost of capital and to offer financing to their buyers at rates and terms that are better than their competitors,” Hochberg said in a speech.

Hochberg used Huawei as an example of what he described as a changed global environment for U.S. exporters in which China and other emerging economies are directing capital flows toward favored sectors in an attempt to grab market share.

Plummer said the Chinese Development Bank (CDB) did agree in 2004 to make available “as much as $10 billion in export credits to potential Huawei customers, not Huawei.”

When that expired, Huawei and the CDB signed a second memorandum of understanding in 2009 for $30 billion for five more years, Plummer said.

Since 2005, Huawei customers have attempted to tap $4.25 billion of CDB export credits to finance 35 projects around the world, Plummer said.

“Only $2.99 billion of the $4.25 billion was actually extended. Over the same period of time, from 2005 until now, our global sales have exceeded $110 billion. It is a minuscule fraction of our business that has actually benefited from a customer getting credit from the China Development Bank,” Plummer said.

“The suggestion that there’s some $30 billion credit line to Huawei that has driven our global growth is fundamentally incorrect,” Plummer said.

A spokeswoman for the U.S. Eximbank said Hochberg had no intention of backing away from his comments.

“Chairman Hochberg stands by his assertion that a $30 billion line of credit from the Chinese Development Bank — used as buyer financing — has undoubtedly contributed to Huawei’s growth. Financial backing of this magnitude creates options and opportunities that may not otherwise exist,” Eximbank Vice President Maura Policelli said.

This is not the first time the world’s No. 2 network equipment provider has clashed with the U.S. government.

Earlier this year, Huawei abandoned a $2 million bid to buy the assets of U.S. server technology company 3Leaf Technologies after the Obama administration raised national security concerns about the deal.

Three years ago, Huawei had to drop a massive investment into U.S. telecoms company 3Com under similar pressure from government officials.

Plummer said Huawei has built itself into the company it is today by putting a heavy emphasis on research and development and taking advantage of low-cost Chinese labor.

The company has also had “a lot of luck” because it was still relatively young when a lot more established telecoms companies went bust in the early 2000s, Plummer said.

Huawei was able to pick up many of the “best and brightest” from those firms, he said.

Editing by Eric Walsh

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