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China Warns Europe Against Imposing Sanctions on Huawei and ZTE

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A spokesman for China's Foreign Ministry has urged the European Union to refrain from imposing restrictions on Chinese telecommunications manufacturers following reports that the EU may do so.

"Any restrictions will definitely affect normal trade and investment and harm our cooperation in this area," spokesman Hong Lei said at a regular press conference.

There have been suggestions that an ongoing investigation into Huawei and ZTE has found that they benefited from Chinese government support, in breach of European law and WTO agreements.

"We have noticed the reports," Hong said, adding that wireless communications companies from both sides have significant business interests in each other's countries, which could be seen as a coded warning that if Chinese vendors are targetted, then European companies may struggle to win Chinese orders.

His comments echo what Sweden's trade minister, Ewa Bjorling said ealier this year when she warned that the probe by the European Commission could harm European manufacturers. Bjorling said that even if the EU proves the allegations are correct, it would be better to engage in dialog to resolve the matter than to impose import duties on their products.

It's not expected that any decision on launching a case against the two companies would be taken until the middle of next year, at the earliest. The Commission is said to have "very sold evidence" that the two companies had been able to sell goods below cost in Europe due to the state subsidies.

Both companies have long denied receiving any form of state-aid, although Chinese banks are particularly generous in financing vendor loans for clients of the two firms.

ZTE's lines of credit amount to USD25 billion, which is said to be exceptionally high for a company with annual sales of USD8 billion. Huawei is also understood to have benefited from large credit lines, including a $30 billion facility from China Development Bank.

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Tags: huawei  zte  China