Huawei Calls Charge of Unfair Government Help 'Hogwash'

itwbennett writes "Huawei's $30 billion credit line from the Chinese Development Bank gives it an unfair advantage over rivals, said U.S. Export-Import Bank Chairman and President Fred Hochberg in a speech Wednesday at the Center for American Progress in Washington, D.C. 'The reality is [that] opaque state-directed capital allows foreign governments to target their financing at specific sectors and companies, while aggressively grabbing market share in an attempt to dominate a market,' Hochberg said. Responding to the charges, a Huawei spokesman called the charge 'hogwash.'"

Comments

Then why wasn't the loan to GM unfair?

[tepples]

I don't see how a multibillion dollar government loan to Huawei is any different from a multibillion dollar government loan to Chevrolet. (Hey that rhymes!)

Re:Then why wasn't the loan to GM unfair?

[sirflyalot]

Chevrolet has established markets worldwide. Huawei is "breaking into the market" worldwide right now. They give the equipment for free to customers, and get their money later in support fees. This is killing all other Telecom vendors worldwide. The customers still pay the same amount in the long run. Also, Huawei did not have the same startup costs as other Telecom vendors, as part of their equipment is stolen from Nokia, Ericsson and Cisco.

Re:Then why wasn't the loan to GM unfair?

[russotto]

Well, thank God and Congress, along with a certain past presidential administration, that China is a "Most Favored Trading Partner".

Every country in the world that the US recognizes, with the exception of Cuba and North Korea (well, maybe Libya is back off the list too, I haven't checked) has that status. It's now called "Normal Trade Relations" though.

Re:Then why wasn't the loan to GM unfair?

[iluvcapra]

The GM loans were meant to bridge GM in an economic crisis, and allow it to go through bankruptcy reorganization without having to layoff tens, if not hundreds of thousands of employees and allied tradespeople. The Huawei loan is for development, to expand into new business. Both are completely acceptable forms of industrial policy; the difference between China and the US is that China actually has an industrial policy and seems to make loans, grants and government procurement in a systematic way to favor internal Chinese development, whereas the US just spends this money when it's an emergency, willy-nilly, on whoever is contributing to political campaigns, or who is running full-page "woe is us and our employees" ads in the Washington Post that week.

The US government used to have the nerve to actually make positive law that favored US business and development, but certain strains of neoliberal thought make policy leaders get all meta about the role of the state and unwilling to make plans, even though our people still demand our leaders take action in emergencies.

Re:Anti-China campaign on my Slashdot?

[DigiShaman]

Some have mentioned GM bailouts, others Airbus backing. This isn't anti-china is so much that people are tired of favoritism, bailouts, market manipulation and corruption happening world-wide at the hands of governments all over. It's fucking bullshit. The role of a government entity should be to provide protection and foster a healthy and fair legal system, not take "sides".

Re:It's not unethical, just different

[nedlohs]

Except it is not different.

The US Government handed a $30 billion credit line to Bear Stearns/JP Morgan Chase in 2008. The Penn Central Railroad and Lokheed bailouts were in 1970 and 1971, so it's been at least 30 years that the US has routinely been handing over loans and credit lines to companies. Sure to try and stop them failing, but clearly them failing benefits their competitors...

Nokia's $500m loan from European Investment Bank

[lkcl]

has anyone forgotten this, already? nokia getting a $EUR 500 million loan for "restructuring purposes"? and ST Thompson - the business cards of all employees at the ST Chip Foundry has the local university on one side and ST on the other: in this way, ST is able to bypass restrictions on EU Grants to "businesses only". so, yes, it's complete horse-shit for the U.S. Govt to be "complaining" about any funding or investment, when it happens the world over. oh - and have we forgotten the world-wide bank bailouts, already? effectively, *any* business loans prior to the outrageous and non-capitalistic bank bailouts could be classified as "Government Loans". several banks in the UK are now Goverment-owned for goodness sake!

Re:Anti-China campaign on my Slashdot?

[angel'o'sphere]

The role of a government entity should be to provide protection and foster a healthy and fair legal system, not take "sides".

If the government would not take side we had no: space program, hence no telecom sattelites, no nuclear power plants, no wind power plants, no fiber glass communication, no health care, no catalytic converter in cars, no public transport in most cities ...
If I would live in a third world country, it was exactly what I would expect from the government: support the companies that can help catch up with the first world.

Just the opposite . . .

[NicknamesAreStupid]

. . . from Cisco, a true-blue American company with $40 billion in offshore profits that will be used to expand, hire, and acquire outside of the United States in order to avoid U.S. income taxes.

Re:It's not unethical, just different

[Doc Ruby]

China routinely prevents countries like the US from defending its domestic industries by insisting that government subsidies are unfair trade competition. Yet here China is doing precisely that, subsidizing Huawei to compete with foreign competition. It's an argument within the rules that China is using to make gains. It's within those rules that the argument is either wrong or right.

Or, rather, that the rules are wrong. I agree with the Chinese that it's OK to subsidize domestic companies in their foreign competitions where their success is strategically important to the domestic country. At least in some cases, that the rules would prohibit. The rules against such subsidies are what should lose this argument.

How financing works

[Shual]

Contrary to what is stated in many comments here, there is no loan to Huawei. The loan is to the customers of Huawei, the telecom operators. Here is how it works: Huawei sells equipment to the telecom operator. The Chinese Development Bank pays Huawei. The telecom operator pays back the loan to the Chinese Development Bank over many years at very favorable conditions. Telecom operators absolutely love this setup as they can buy equipment without putting cash on the table. This is a huge competitive advantage for Huawei, and it explains why Huawei has grown to be the #2 telecom vendor in the world (behind Ericsson) in a matter of years. None of the western vendors (Ericsson, Alcatel-Lucent, Nokia Siemens Networks, Cisco) can give similar financing conditions to the operators, and this is going to very effectively kill the European and North-American competitors of Huawei.

Re:How financing works

[Doc Ruby]

If that's true, then Huawei's denial is the hogwash. It's a wordgame (and a shellgame with the money).

The correct response from the US is more demand-side financing guaranteed by the US government. Far better than all the supply-side giveaways that don't really grow market or efficiency, and clearly necessary given China's cash advantages.

Re:It's not unethical, just different

[Doc Ruby]

Your examples are really demonstration only that the US spent at least 37 years between those bailouts not "routinely handing over loans and credit lines to companies". You need continuous examples over that long period of time to show it's "routine". Indeed, their relative infrequency shows that they're extraordinary. Not that any are necessarily OK, but saying they're "routine" is not supported by what you show.

Stop the "stolen" goods in customs

[tepples]

Also, Huawei did not have the same startup costs as other Telecom vendors, as part of their equipment is stolen from Nokia, Ericsson and Cisco.

If Nokia, Ericsson and Cisco can prove that their tech was misappropriated, then perhaps they should get Huawei's shipments stopped at the US and EU borders.

Re:Stop the "stolen" goods in customs

[sirflyalot]

I believe that Huawei cannot sell any of their Telecom equipment in the US. The Huawei switches exhibit the same bugs that the cisco switches have. I was in Addis Ababa, Ethiopia several years ago, and ETC had a room of Huawei equipment, and some of it was openly running Nokia Networks software.

Not What "Hogwash" Means

[Doc Ruby]

I understand that English is probably not the Huawei spokesperson's first language. But calling the claim that China's $60B government credit line is an unfair competition subsidy "hogwash" means that Huawei is denying that it is a subsidy, or that it exists. It exists, and it it is a subsidy. It's debatable how wrong or illegal it is. But it's is not "hogwash".

Re:It's not unethical, just different

[Anonymous Coward]

Oh lets see... in my lifetime now...
Goverment bailouts....

1970 3.2 billion penn central railroad
1971 1.4 billion lockheed
1974 7.8 billion Franklin National Bank
1975 9.4 billion new york city
1980 4.0 billion Chrysler
1984 9.5 billion Continental Illinois National Bank and Trust Company
1989 293.3 billion Savings & Loan
2001 18.6 billion Airline industry
2008 30.0 billion bear sterns
2008 400 billion Fannie Mae / Freddie Mac
2008 180 billion American International Group (A.I.G.)
2008 25 billion General Motors, Ford and Chrysler again.
2008 700 billion Troubled Asset Relief Program
2008 280 billion citigroup
2009 142.2 billion bank of america

Hows that for a start. And those are just the 'big' ones.

We're hypocrites.

crap

[Lehk228]

Huawei needs the help, I bought one of their tablets and returned it the following day, it was a total piece of crap

Re:It's not unethical, just different

[Doc Ruby]

That is a good start, and sufficient to show it's routine.

FWIW, I'm no hypocrite. I don't defend most of those specific bailouts, especially the banks and aerospace ones, and also the way the railroad one neutered the railroad industry. The NYC bailout is almost entirely different - that's not a private subsidy, though it enabled the corporations that drove the bankruptcy to get even further from paying their way. Nor do I say that government subsidies to private interests, particularly strategic industries, are always unethical.

And even in the collective capacity, the US is not exactly a "hypocrite" - hypocrisy is a human characteristic, while groups of humans (governments, corporations) are always self-contradictory in rules of behavior. There is selective enforcement of government subsidies, which mostly advantages China at the expense of the US. Though it evidently advantages the Americans who have the disproportionate power to weaken the US protection of its general welfare, while profiting from benefits to China.

I'm glad for the Cheap phone

[rusl]

I'm pretty happy with my bottom end Huawei bar phone. Pretty well thought out (has the software drivers to interface with windoze via USB built in). A lot better than the LG phone I was using but to be fair it is newer. The best thing about it is it is a lot more in the realm of open standards so I can interface with it via linux and things aren't locked down in an innovation stifling way. Now if the software was all open-source/easier to update I could fix a few bugs and it would be perfect. (like getting the ssh to work, making the key lockout period work better, a bunch of minor stuff)