E.U. could investigate Chinese subsidies to modem makers

A second compaint from Belgian modem-maker Option prompted the concern

The European Commission is considering opening a second enquiry to investigate if China is illegally subsidizing tech companies that produce wireless modems.

The move follows a complaint by Belgium modem-maker Option. Option is the E.U.'s only producer of 3G modems and filed a separate complaint about modem dumping by China earlier this year.

Option's new complaint alleges that China's main modem manufacturers, ZTE and Huawei, which hold 90 percent of the market for 3G data cards and USB modems, are being unfairly subsidized by the Chinese government and government-owned banks.

Huawei in particular has a line of credit far exceeding what could be considered normal, giving the company an unfair advantage, said Option spokesman Jan Pote. The company believes that "the selling practices of these Chinese competitors is and has been illegal under E.U. law".

The Commission's Directorate General for Trade could not confirm if a formal investigation would go ahead, a spokesman said.

If the Commission were to find against China in any investigation it could lead to increased import tariffs, which would further strain E.U.-China trade relations. Beijing accused the E.U. of protectionism when the anti-dumping probe was launched in June. On that occasion, Option complained that Chinese companies were dumping wireless modems onto the E.U. market at absurdly cheap prices.

Tags Huawei TechnologiesOptionZTElegalChinagovernment

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Jennifer Baker

IDG News Service

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