China Fires Back At EU Trade Probe - InformationWeek

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Infrastructure // PC & Servers

China Fires Back At EU Trade Probe

The European Union is investigating whether Chinese modem manufactures are dumping products into the market at excessively low prices.

Top Chinese industry officials fired back at the European Union on Friday over an anti-dumping probe into wireless modems from China, saying there must be a level playing field for Chinese IT firms such as Huawei and ZTE.

The probe was launched following a complaint to the European Commission from Belgian wireless technology company Option, which is the sole producer of similar products in Europe. Option claimed that Chinese firms are "dumping" modems into the European Union market by selling them at extremely low prices.

The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) said the Chinese companies involved in the investigation are "extremely shocked" and are actively defending themselves in the investigation.

"Many of the wireless modems imported from China are sold at a higher price than those made in Europe," said Wang Guiqing, VP of CCCME. "The EU's investigation is a move that kills market innovation."

The probe, announced by the European Commission on June 30, represents the largest anti-dumping case in the history of China's relationship with its largest trading partner. The measures add to pressure on Chinese manufacturers following recent restrictions made by the Indian government on telecommunications equipment imports from China.

It is understood that it could take between 12 and 15 months to complete the investigation. Pending the outcome, the Commission may take temporary anti-dumping measures. Experts say that safeguard measures to increase duties and impose quotas are easier to invoke than anti-dumping claims, as proof is not required. If the commission finds that products are being dumped at unfair prices, further tariffs can be imposed.

According to statistics, Huawei accounts for about 40% of global market share in data cards while ZTE has 35%. In 2009, worldwide sales of data cards reached 80 million, with Huawei shipping some 35 million. In some EU countries Huawei has over 70% share of the data card market. Europe's largest mobile network, Vodafone, has publicly said that Huawei data cards are already "in short supply."

Huawei's share in the European market is significantly larger than ZTE's; according to the anti-dumping investigation, ZTE's share is $300 million versus $3 billion for Huawei. Last week, China's Ministry of Commerce estimated the case involves about $4.1 billion worth of goods, but CCCME's Wang said the real value of goods impacted by the case is closer to $2 billion.

"But that is big enough to make it the biggest foreign probe into China's high-tech exports," Wang said.

China's Ministry of Commerce has complained about the investigation, saying that it will not only harm China's interests and its development of science and technology, but will also impede the European Union's economic recovery. The ministry describes the measures as trade protectionism and an abuse of the norms of international trade, arguing it reserves the right to take further measures.

Additionally, Chinese equipment manufacturers have set up their own special team, working closely with the CCCME in response to the investigation.

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