WSJ Discovers China Ties Export Credits, States Offer Location Incentives, and Banks Give Loans to Large Companies

WSJ is shocked, shocked to discover that China supports major Chinese companies. The first half of the article and the headline encourages the reader to infer that unreasonable Chinese government support is why Huawei has done so well.

The facts in the article don’t support that claim. By and large, the inference is inaccurate. Huawei’s success is primarily due to extraordinarily hard work and farseeing management. Like most large companies, it takes advantage of government support, which often favors tech companies.

Yes, the government ties low-interest loans in Africa to purchases from Chinese companies. So do the US, the Koreans, and many others..

The city of Dongguan provided low-cost land for a large research center. Dozens of US cities, including New York & Washington, offered massive subsidies to Amazon when considering a second headquarters. Wisconsin promised $3B for a Foxconn plant.

Huawei has received research grants from the Chinese government, as do many US companies. The EU is particularly generous funding corporate research, including $1 billion for 5G. The current US government has called for more research funding, a very good idea.

That Huawei receives tax breaks worth billions angers the WSJ, even though the reporter didn’t find anything illegal or corrupt. That’s small compared to the hundreds of billions for Google, Amazon, Facebook and other US giants. Apple faces $13 billion of claims in Ireland. The US Internet companies are paying $billions in fines for cheating on taxes in Europe.

Chinese banks have provided loans to Huawei. So have banks around the world. Huawei’s profits are high and the balance sheet shows remarkably little debt. Banks line up for borrowers like that.

Mega-lenders China Development Bank and Export-Import Bank of China provided more than $30 billion in credit lines for Huawei’s customers. Finland arranged loans for AT&T purchases from Nokia. Korea provided billions in loans for Reliance Jio in India, which became Samsung’s key reference account for 5G & 4G.

Reporter Chuin-Wei Yap did include “Huawei’s largest American competitor, Cisco Systems Inc., received $44.5 billion in state and federal subsidies, loans, guarantees, grants and other U.S. assistance since 2000, Good Jobs First data show.”

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