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China's Credit Line Blowback

Ray Le Maistre
1/13/2014
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The thorny issue of vendor financing and the support that Huawei and ZTE get from China's banks won't go away.

As Light Reading has reported in the past, both of China's major vendors have struck hefty credit agreements that enable them to offer cheap vendor financing loans to customers. (See Huawei's Lucky Number: 30B, Huawei, ZTE Strike New Funding Deals, and ZTE Secures $15B, Highlights R&D.)

Now, as our contributing editor Robert Clark writes in a blog, Blowback: China's vendor financing brings its own problems, some of the resulting deals are attracting unwelcome attention.

As Clark notes, greater transparency would help alleviate some of the problems now escalating for the vendors in Africa.

Ray Le Maistre, Editor-in-Chief, Light Reading

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R Clark
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R Clark,
User Rank: Blogger
1/15/2014 | 2:29:44 AM
Re: What goes around, comes around
These huge loans for developing countries are kind of a political play, so EU countries are not quite so attractive for China. Also, unlike the African markets they're not building out much bigger greenfield networks.

Western govt don't provide the tens of billions of dollars that the Chinese state banks do. Plus the western banks & governments set some conditions on governance, which the Chinese don't do.

I'm guessing the reason there hasn't been a WTO compalint about  this is because a) the US and EU have too many other things on their plate with China  b) the vendors fear they would lose China market share. 

 
Ray@LR
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Ray@LR,
User Rank: Blogger
1/13/2014 | 8:22:22 AM
What goes around, comes around
The current issues facing Huawei and ZTE re vendor financing deals are in Africa, but it's hard to imagine there won't also be fallout in other markets (including some in Western Europe) where the availability of cheap credit has been a significant driver in strategic decision-making. 

It should be noted also that it's not only China's banks that make such credit lines available.
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