Big hullabaloo out of Europe this week, with a European Commission investigation reportedly finding that China's largest telecommunications equipment makers benefit from "massive" credit lines from state-owned banks. (see WSJ article)
Yawn.
Seems the Europeans are catching up to their American brethren who've been ramping up the crying-foul-rhetoric over such "preferential financing" for better than a year now. Frankly, if you consider the facts, it seems that there really aren't any pots or kettles in this global kitchen of ours that are not decidedly black.
Ah yes, facts...
Let's look at Huawei (full disclosure: I work there). In recent years, and increasingly stridently in 2010, there have been countless media reports and hyperbolic political rants about the $10 billion in "financing" Huawei purportedly received from the China Development Bank (CDB) in 2004. The fact is, Huawei received no such financing. Rather, the CDB essentially created a "buyer export credit" pool that Huawei's customers could borrow from, provided they met the bank's credit assessment, risk profile, etc. From 2004 to 2009, the total credit extended by or for Huawei's customers from the CDB amounted to around $5 billion (and far less was actually drawn), in pretty stark contrast to Huawei's almost $100 billion in sales over the same period. Doesn't seem as if "massive" Chinese Government credit lines had much to do with Huawei's growth, does it?
But hey, while were doing the fact-checking, let's review some of our other kitchenware. According to the U.S. Export Import Bank's website, specifically the "FY 2010 At A Glance" PDF, the Exim Bank supported over 3,500 transactions in support of U.S. export sales last year alone, to the tune of almost $25 billion in loans, guarantees, and export credit insurance. Last year alone. But all in accord with Organization for Economic Cooperation and Development (OECD) rules, right? Well, almost. According to a January 12, 2011 WSJ article, "...in a move crafted with White House involvement, the U.S. export-financing agency agreed for the first time to match China's cheaper financing terms to get the Pakistan government to buy 150 General Electric Co. locomotives." This, per the Journal, required the U.S. to "work with" the OECD to craft a "new loan model" to come up with the financing terms for the $477 million deal, "one of several steps the Obama administration has taken to pursue its goal of doubling U.S. exports over five years."
Don't get me wrong, I'm not criticizing the U.S. Government for trying to help U.S.-based companies compete against Chinese-based or other companies, nor am I defending any country's manipulation of the marketplace or other industrial policy. I'm just highlighting that we should at the very least remain intellectually honest about what's going on in the world. One-sided media reports and xenophobic political rhetoric that serve to fuel protectionist or, worse, nationalistic fervor, are not in our best interest as Americans. What we deserve, instead, is a fact-based and balanced dialogue.
But, wait, what about the Europeans? That's where this latest salvo came from, right?
Ugh... Europe's a lot of geography to cover, with far too many national and regional and pan-regional organizations and governments, etc. to consider, so, since all of this started around the telecommunications equipment industry, let's take a gander at Sweden, home to world-leading telecommunications infrastructure manufacturer Ericsson.
Sweden's EKN, per the website, "has been commissioned by the government to promote Swedish exports and the internationalisation of Swedish companies...by insuring export companies and banks against the risk of non-payment in export transactions...". Risk free. Nice. According to the EKN, the demand for its guarantees increased sharply during 2009, amounting to 80 billion Swedish Krone (roughly $12.5 billion), more than doubling the previous year. And, as of January 2010, the Swedish Parliament approved a doubling of the guarantee limit to 500 billion Swedish Krone (roughly $77.5 billion) - pretty impressive for a country with a mere 9.3 million inhabitants.
It will come as no surprise that, according to the 2008 EKN Annual Report, EKN guarantees backed "several large Ericsson transactions in India, Pakistan and Turkey." Go figure...
Again, I'm not taking sides, or endorsing anyone's policies or practices, I'm just pointing out that, strangely enough (or actually not at all so), the playing field is actually a lot more level than it is often portrayed to be.
So let's get to the real concern: Biased (intentional or not - I'll be gracious on that point) media reporting or government speak that mis-represents or one-sidedly presents the facts in order to push broader protectionist or nationalist agendas on an under-informed public. Indeed, if you follow the logic of some of the suggestions made in Washington and in the media related to certain Chinese telecom companies, you'd have to assume that should the U.S. and Pakistan go to war, GE - beholdened to the U.S. Government to the tune of almost half a billion dollars for the Pakistan train deal - would naturally respond to its government benefactor's military and political agenda and derail all of the Pakistani locomotives...
Silliness. Utterly ridiculous. GE is an independent global company with obligations and responsibilities in all of the markets in which it does business. GE doesn't answer to the U.S. Government any more than any independent Chinese-based or Swedish-based companies answer to their respective governments.
Enough already. Pot, kettle, black, indeed...
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