Europe offers solace after US ruling

The report by the US, unusual in that it is a government action against two individual companies from China in a highly competitive global industry, reflects the political anxiety against the rise of Chinese companies operating in the US.

The US congressional finding against Huawei and ZTE is based on rumor rather than facts and is aimed at impeding competition from China, the Chinese government and the two companies say.

Shen Danyang, a spokesman for the Commerce Ministry, says the action is contrary to "the free-market principle that the US always stands for" and is bad for businesses in both countries. The report "employs many rumors and speculations to prove non-existent accusations", Huawei said in a statement. "We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese telecommunications companies from entering the US market."

"We have tried to mitigate the doubts from the US by offering objective third party (witnesses) to test our credibility during the investigation," Dai says.

"We are disappointed with the result, although it does not surprise us."

Wu Hequan, an academician at the Chinese Academy of Engineering and an industry expert, says the US bias toward Chinese telecom companies is deep-rooted and difficult to eradicate.

"The frequent charges and accusations from the US side have already tarnished the market's reputation as 'an open and fair one'." However, Huawei and ZTE, which are growing rapidly, should not abandon the US market, Wu says.

"When the dust settles, time may tell people that Chinese companies are trustworthy, but you need to insist on being there in the first place."

Chinese telecommunication companies such as Huawei and ZTE have gained market share rapidly worldwide in recent years, and that has drawn "admiration, jealousy, and doubts" in some quarters, Dai says.

People tend to overlook what is happening in the global telecommunications industry before expressing skepticism about Huawei and ZTE, he says. He attributes the rise of these Chinese companies largely to the fast-changing nature of the global telecommunications industry in the past two decades. It has changed so greatly and so rapidly that newcomers can establish themselves quickly even as older companies lose ground, he says.

"You drop out very fast if you don't adapt to changes."

Unlike established Western telecommunications companies, Huawei and ZTE started from scratch and adapted to changes quickly, he says, and they seized opportunities rapidly amid the upheavals in the industry.

Despite the worldwide attention the US report has received, its direct economic impact on the companies is small, Dai says. The report referred mainly to systems products in the US, while the bulk of the companies' profits there are from selling end products such as mobile phones.

ZTE's turnover in the US was $400 million last year, and systems products cited in the report accounted for only $30 million of that, he says.

Huawei's situation in the US is similar, he says. Huawei did not return calls from China Daily.

"Overall the decision does not influence our business much," Dai says. "The US remains a very important market for us, and we will continue to communicate with them."

However, Zhao Hailin, a telecom analyst with IHS iSuppli, a US-based research company, is not so sanguine about the report or about Huawei's and ZTE's prospects in the US.

"Gradually but inevitably the US authorities have put what were unspoken rules in clearly spelt-out terms. With the harm done to the Huawei and ZTE brands, the two companies may find it difficult to advance their burgeoning mobile phone sales in North America, not to mention the more sensitive telecom equipment businesses."

Contact the writers through diaoying@chinadaily.com.cn