ZTE is seeking a hefty $11.4 billion in credit financing, threatening to put the issue of Chinese state support for vendors back on the agenda.
The ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) board last week voted to pursue a $7 billion credit facility from China Development Bank (CDB) and another worth 30 billion yuan ($4.39 billion) from the Bank of China.
The board announcement did not specify the purpose of the funds, but ZTE, like Huawei, has been a major recipient of funds from China's state export banks, the CDB and the Export-Import Bank of China -- the world's biggest supplier of export finance.
Former US Ex-Im Bank chairman and president Fred Hochburg says the $500 billion in loans and insurance extended to Chinese exporters in 2015 alone was "about the same amount of financing Ex-Im [Bank] has provided over its entire eight-decade history."
The ability of state banks to access low interest bond markets means Chinese firms can offer financing that rival businesses can't hope to match.
The US and the EU have made only half-hearted attempts to tackle China over state support for telecom vendors.
The EU tried to file a case in 2013, but in the end settled for a commitment from China to increase market access.
The US has been more focused on the potential security threat from Chinese network gear and on ZTE's sanctions breaches. (See US Lifts ZTE Export Ban – Report.)
A House Intelligence Committee inquiry in 2012 called on government agencies to investigate financial support for "key [Chinese] companies," but this appears to have gone nowhere.
In a 2011 speech Hochburg said that the stratospheric growth of Huawei Technologies Co. Ltd. was the result of "more than just good sales and marketing."
He added: "One of the central reasons the company's growth has been so dramatic … is that it's backed by a $30 billion credit line from the China Development Bank."
The current US president has made headlines with accusations against China of currency manipulation, stealing jobs and "raping" the US.
By contrast, heavy state support for Chinese exporters actually exists. The president has referred in passing to China's use of "illegal export subsidies," but so far has shown no sign of taking action.
— Robert Clark, contributing editor, special to Light Reading