EU Analysis Says Huawei, ZTE Damaging European Firms

The European Union is reportedly considering whether to launch a formal investigation into alleged state subsidies received by Huawei and ZTE from the Chinese government, risking a potential trade war, according to The Wall Street Journal.

Internal analysis at the European Union (EU) has determined that the two companies are damaging European producers of wireless networking equipment by dumping low-cost products in the EU. This, it says, is achieved by Chinese government support given to them and their customers.

The document reportedly states that any preferential treatment would destabilise the market and create an unfair advantage in an otherwise competitive European market. It says that the manufacturers are selling equipment for at least 35 percent below what it considers to be a market price.

The analysis also suggests that Chinese state support is expanding. ZTE recently signed a new agreement with the state-owned China Development Bank that has increased a financing facility from $15 billion to $20 billion.

Huawei ZTE concerns

An investigation would be the first to be launched by the EU without first receiving a complaint. EU trade commissioner Karel De Gucht is believed to be the driving force behind a probe as many companies will not want to make a complaint for fear of retaliation from the Chinese government. However, should the European Commission initiate proceedings independently, the Chinese government could view it as a direct confrontation and issue retaliatory tariffs.

The EC has been viewing the situation with interest for some time and was believed to be preparing the final stages of an investigation earlier this year. But it reportedly put proceedings on hold while it waited for a response from China over a separate investigation into suspected dumping of solar panels.

The Commission will now apparently wait until it receives a proposal promised from China to address European concerns.

A number of Western governments have raised security fears about Huawei and ZTE in recent months, with the Intelligence Committee of the US House of Representatives, the lower house of  Congress in the US, declaring that they should not be allowed to sell their products in the US. Its report warned that Chinese state influence over the two firms meant its wares would be used for espionage efforts.

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