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Huawei calls charge of government help 'hogwash'
- — 18 June, 2011 08:01
Huawei Technologies has rejected a charge by the head of the U.S. Export-Import Bank that it has an unfair advantage over rivals because of help from the Chinese government.
In a speech Wednesday at the Center for American Progress in Washington, D.C., Export-Import Bank Chairman and President Fred Hochberg said Huawei had a US$30 billion credit line from the Chinese Development Bank. That line of credit reduced the Chinese networking vendor's cost of capital and provided financing to its customers at rates not available to buyers of other vendors' gear, Hochberg said. The Ex-Im Bank is the official export credit agency of the U.S.
"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.
On Friday, a Huawei spokesman refuted Hochberg's charge.
"That is all hogwash," said Bill Plummer, Huawei's vice president of external affairs.
The Chinese Development Bank, established by the Chinese government to help finance development outside China, has set aside $30 billion for loans to Huawei's customers, Plummer said. It was set up through a 2009 memorandum of understanding between Huawei and the bank and is good for five years. It followed another such five-year fund that was established in 2005, he said.
But the fund is not a line of credit to finance Huawei's own operations, and Huawei doesn't control who can use it, Plummer said. In addition, the arrangement hasn't given Huawei a significant edge over competitors in securing deals, because it has barely been used, he said. Since 2005, money from the fund has been used for 35 projects that Huawei was involved in, but only $4.2 billion in credit was extended and only $2.99 billion of that credit was actually used, according to Plummer.
Over the same period, Huawei did $110 billion worth of business around the world, he said.
Huawei does have a line of credit from the bank for its own use, but it is only worth $1.5 billion, a small part of the $25 billion in credit that Huawei has secured from 28 banks worldwide, Plummer said. Only 48 percent of that total figure comes from banks in China, he said.
Hochberg alleged that Huawei had an unfair advantage over U.S. vendors such as Cisco Systems and Patton Electronics, a small networking company in Gaithersburg, Maryland. Huawei and other non-U.S. companies use government help to offer below-market-rate financing to potential customers, beating out U.S. companies in the process, he said. Hochberg noted that the Ex-Im Bank has provided Patton a $4 million government-backed line of credit for working capital.
After Huawei challenged Hochberg's comments, the Ex-Im Bank didn't back down from the speech.
"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," the bank said in a statement attributed to Ex-Im Bank Vice President Maura Policelli.
Huawei has faced fire before from the U.S. government over alleged security and competition issues.