'No different' from others: Huawei plays down report that it receives state financial aid
Report estimates that the Chinese tech giant had received as much as US$75 billion in state support as it tries to shake off allegations of government ties
Huawei Technologies said on Thursday that its relationship with the Chinese government was “no different” from any other private company operating in China, after a report estimated it had received US$75 billion of state support that helped it grow into the leading 5G network gear supplier it is today.
“Like other tech companies that operate in China, including those from abroad, Huawei receives some policy support from the Chinese government,” Karl Song, vice-president of the company’s corporate communications department, said in a statement. “But we have never received any additional or special treatment.”
The company was responding to a report published by The Wall Street Journal on Wednesday that said the Chinese government promoted Huawei's global rise with as much as US$75 billion in grants, credit facilities, tax breaks and other financial assistance.
According to the Journal, Chinese government assistance helped the Shenzhen-based company grow from a little-known vendor of phone switches to the world’s largest telecommunications equipment supplier, allowing it to offer generous financing terms and undercut rivals’ prices by some 30 percent.
“While financial support for favoured firms or industries is common in many countries, China’s assistance for Huawei, including tax waivers that began 25 years ago, is among the factors stoking questions about Huawei’s relationship with Beijing,” the report said.
The embattled tech giant has been deeply embroiled in US-China trade tensions in the past year, accused by Washington of being a conduit for Chinese espionage. It was put on the US Entity List, a trade blacklist restricting its ability to purchase US technology, in May this year.
The Shenzhen-based company has long denied close links with the Chinese government and maintained that Washington has no evidence to support accusations that its products can be used to spy for China.
In the statement on Thursday, Song said the company’s working capital primarily comes from its own business operations – which make up 90 percent of its working capital – and external financing rather than government subsidies.
“Huawei's external financing follows all market rules, and our cost of debt aligns with market standards,” Song added.
The Journal’s review was based on public records including company statements and land-registry documents, with a methodology it said had been verified with subsidy analysts.
The report said Huawei’s subsidies in the five years to 2018 were 17 times as large as similar subsidies reported by Finnish company Nokia, the world’s second-largest telecoms equipment maker.
About US$46 billion or the largest portion of assistance to the Chinese company came from state lenders, including more than US$30 billion in credit lines made available by China Development Bank (CDB) and Export-Import Bank of China for Huawei’s customers in the last two decades, the report said.
However, Song said at a press conference on Thursday that Huawei was not the direct beneficiary of the US$30 billion credit line mentioned in the report – the company had signed a strategic agreement with CDB to provide loans to Huawei clients, not to Huawei, he said. "CDB leading loans to Huawei clients is purely the commercial act which studies the qualifications of each Huawei client [applying for a loan] case by case. Huawei is not part of the US$30 billion credit line at all."
The Shenzhen-based company also saved as much as US$25 billion in taxes between 2008 and 2018 due to state incentives to promote the tech sector, as well as receiving US$1.6 billion in grants and US$2 billion in land discounts, said the Journal.
In the southern China city of Dongguan, Huawei paid prices that were 10 percent to 50 percent of average rates for similarly zoned land in the city, saving it another estimated US$2 billion, according to the review.
While Song did not deny that Huawei received government subsidies, he said the company applied for them just like any other company in China does, including foreign companies.
“The fact is that every tech company that operates in China is entitled to certain subsidies from the government, as long as they meet certain conditions,” Song, adding that these subsidies are primarily to support research programmes.
“Over the past decade, the total amount Huawei has received in R&D (research and development) subsidies from governments both inside and outside China amounted to less than 0.3 percent of our total revenue. In 2018, we only received an amount equal to 0.2 percent of our annual revenue,” Song said.
Outside of China, Huawei also enjoys tax incentives from foreign countries, such as France, which gives "huge tax refunds" for R&D, he added.
This is not the first time the company has faced allegations that it is financially supported by the Chinese government. In April, UK newspaper The Times cited sources as saying US intelligence had accused Huawei of being funded by Chinese state security.
“Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources,” a company representative was quoted as saying for the Times report.
The same month, the company again defended its independence after a research paper questioned its claim to be employee-owned, saying that the identity of the actual owners is unknown and may potentially include the Chinese government.
The paper said Huawei is wholly owned by a holding company, of which 99 percent is held by an entity called a “trade union committee”, potentially implying that the telecoms equipment giant is owned and controlled by the government.
“The trade union committee, which manages the union in Huawei, organises some amateur, after-work events including physical activity, to ensure employees have a healthy work-life balance,” said Jiang Xisheng, chief secretary of Huawei’s Board of Directors, in a press conference in April. “It is not involved in any decisions connected to Huawei’s business and operations.”