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ZTE seeks another $6.8B in state bank credits

ZTE is seeking $6.8 billion in credit facilities that can help subsidize its equipment sales as it tries to revive its fortunes in the face of industry headwinds.

It is applying for $4 billion in credit from the China Development Bank and another 20 billion yuan (US$2.83 billion) from the Bank of China, the company announced Friday following its annual general meeting.

It said each line of credit would be for purposes including trade finance, letters of credit or loans.

ZTE applied for $10.4 billion in credit lines from the two banks in August 2018, just after it settled with the US government over penalties relating to ZTE's illicit trade with Iran.

The Commerce Department had blocked US component supplies and imposed a $1 billion fine on the Chinese vendor.

ZTE has since struggled to recover, not helped by the COVID-19-induced slowdown. In Q1 it reported a 27% slide in earnings on a 3% fall in revenue.

In its revival it has leaned heavily on China's massive 5G rollout, yet last year total sales were still 21% below the 2017 level.

International sales have fallen to just 36% of total revenue, down from 43% two years earlier, while its handset unit, once ranked in the world's top ten, has lost nearly three-fifths of its business.

ZTE faces further headwinds in India, one of its biggest offshore markets, with a rising backlash against Chinese firms following last week's border clash.

The level of state support for the Chinese vendors has become a sore point for foreign rivals and governments.

Rival Huawei has reportedly received as much as $75 billion in national, provincial and local subsidies – the biggest part export credits to help fund its sales.

These generous lines of credits have enabled the Chinese firms either to subsidize sales or facilitate low-interest loans to operator customers outside China.

Foreign firms have been wary of complaining out of fear it will rebound on their business in China.

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— Robert Clark, contributing editor, special to Light Reading

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