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Huawei refutes suggestions state support drove its growth

Chinese tech giant has lashed out at a US media report that claims its success was fuelled by billions of dollars in financial support from China's government, arguing that its ties are no different from any other private company that operates in the country.
Written by Eileen Yu, Senior Contributing Editor

Huawei Technologies has lashed out at a US Media report that suggests the tech giant's success is fuelled by billions of dollars in financial support from the Chinese government, arguing that its ties are no different from any other private company that operates in China. The vendor adds that it has invested between 10% and 15%of its revenue in research and development over the past three decades, which it attributes to its success. 

In a statement Thursday, Huawei said an article published by The Wall Street Journal was based on "false information and poor reasoning" and speculated "wildly" about the vendor's growth position today. "Huawei's success is the result of our 30 years of heavy investment in R&D, our focus on customer needs, and the dedication of our [more than] 190,000 employees," it said. "The Wall Street Journal is a professional media outlet, so we have to question its motives and purpose for publishing this article."

Published on December 25, the article said Huawei had access to as much as $75 billion in financial support from the Chinese government, enabling the vendor to offer attractive service terms and undercut its competitors' pricepoints by 30%. 

Citing analysts and customers, as well as a review of Huawei's grants, credit facilities, tax breaks, and other financial details, The Wall Street Journal added that the biggest chunk in financial help totalled some $46 billion in loans, credit lines, and other support from state lenders. 

The vendor also enjoyed tax waivers as early as 25 years ago, according to the article, which said Huawei saved as much as $25 billion in taxes from 2008 to 2018 as a result of state incentives to drive China's tech sector. The Chinese tech giant also received $1.6 billion in grants and $2 billion in land discounts, it added. 

To calculate Huawei's state support, the US publication said it assessed how major state financial incentives--adjusted to account for changes in their scope over the years--allowed the Chinese tech vendor to spend more freely. Its calculations compared Huawei's tax payments with the company's projected tax liability in the absence of such incentives, it said. Its estimates excluded other forms of policy support available to Huawei, such as salary tax benefits, property-tax abatements, and subsidised raw materials, as well as tax breaks from standard accounting policies, such as tax deductibility for expenses including research and development, according to The Wall Street Journal. 

In its response, Huawei said it had invested close to $73 billion in R&D over the past 10 years, with $15 billion poured into such efforts in 2018 alone. It also poured more than $4 billion into 5G between 2009 and 2019, which it said was more than the total investment major equipment vendors in the US and Europe collectively had invested in 5G. 

Huawei further noted that its ties with the Chinese government were no different from that of other private company that operates in China. And while it acknowledged receiving some "policy support" from Beijing, it said this was no different from other tech companies in China as well as those overseas. 

"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. This includes tech companies that come from overseas," it said. "The subsidies provided to tech companies are primarily used to support research programs. Huawei applies for these government subsidies just like any other company does."

"We have never received any additional or special treatment. Our working capital primarily comes from our own business operations and external financing, rather than government subsidies," said the vendor, adding that its business operations had fuelled 90% of its working capital over the past decade. 

During the same period, it said it received R&D subsidies from governments in China as well as other countries that totalled less than 0.3% os its revenue. Last year, this figure accounted for 0.2% of its annual revenue, it added. 

Huawei noted that The Wall Street Journal had published a series of "disingenuous and irresponsible" articles about the Chinese vendor, which it said harmed its reputation. "Huawei reserves the right to take legal action to protect our reputation," it said.

The US government repeatedly has accused Chinese networking vendors, namely Huawei, of sharing sensitive information with their government and providing backdoor access to private US business communications. The Trump administration had called for countries to boycott Huawei's telecommunications systems, specifically its 5G equipment, and put pressure on its allies, including Europe, New Zealand, Australia, and the UK, to ban Huawei products, threatening that it would be "difficult" for the US to do business in countries that deployed Huawei equipment.


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