Chinese Economics Thread


noticed through Jane's (
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Berlin to probe Chinese deal for German aerospace group Cotesa
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Move highlights worries over Beijing’s growing M&A activity in Germany’s high-tech sector

Berlin has intervened in the takeover of a small but innovative German aerospace company, using a new law that gives it enhanced powers to block Chinese deals in strategic sectors of the economy. Cotesa, which makes parts for aircraft makers such as Airbus and Boeing, was due to be bought by a subsidiary of the state-run China Iron & Steel Research Institute Group for a price German media reported at between €100m and €200m. But Germany’s economics ministry has now stepped in to put the transaction on hold. A ministry spokesman confirmed it was investigating the deal “to check whether it complies with Germany’s law on foreign trade”. Berlin moved last year to expand its powers to stop Chinese groups acquiring German companies amid creeping concerns about the scale of Chinese M&A activity in Germany’s high-tech sector. The backlash was prompted by the €4.5bn takeover two years ago of Kuka, Germany’s largest manufacturer of industrial robotics, by Chinese appliance maker Midea, which stoked fears that advanced German technology would end up in Asian hands. Such deals have been subjected to much greater scrutiny since then. Later in 2016 Fujian Grand Chip Investment was forced to abandon its offer for Aixtron, a German chip equipment maker, after US authorities raised objections on national security grounds. Before that the German government had unexpectedly reopened a review of the deal. Part of the increased concern about Asian deals has been prompted by a series of job losses at companies acquired by Chinese investors. Ledvance, a former subsidiary of light company Osram that was bought last year by a Chinese consortium, recently announced plans to lay off more than half its employees in Germany — a total of 1,300 workers — and close two factories. Kuka has also said it is cutting 250 of its 750 jobs in Augsburg.

The earlier version of Germany’s law on foreign trade allowed the government to block a company from outside the EU acquiring more than 25 per cent of a German entity if the deal endangered public order or national security. It largely applied to defence industry enterprises. But the law has since been expanded to cover a broad range of companies operating in “critical infrastructure” such as electricity and water suppliers, hospitals and transport, as well as advanced defence technologies. The government also has up to four months to investigate takeovers, from two months previously. The economics ministry spokesman said 30 deals had been investigated since the law changed in July. He also stressed that “no acquisition has been blocked” since the original law came into force in 2004. Germany has also backed plans drawn up last year by the European Commission to toughen screening of overseas investment on national security grounds. Under the plan, EU governments would have the power to block Chinese and other foreign takeovers even if they were carried out via European shell companies. Intra-EU takeovers are normally exempt from such checks because of EU rules on free movement of capital within the bloc. Cotesa, which has about 750 employees and expects revenues this year of €65m, produces composite fibre parts used in Airbus’s long-range aircraft and in Boeing’s helicopters. Jörg Hüsken, its founder and managing director, told Handelsblatt newspaper that he had sought investors to fund an expansion but “the Chinese are the only ones who recognised our real potential”. China Iron & Steel’s goal is to use Cotesa to supply China’s state-owned aircraft-maker Commercial Aircraft Corporation of China, also known as Comac.
 

Hendrik_2000

Brigadier
Over the past several decades, China’s economic development has lifted hundreds of millions of Chinese out of poverty and resulted in a burgeoning middle class. Middle class households typically have enough income to satisfy their primary needs – food, clothing, and shelter – with some disposable income left over for additional desired consumption and savings. In 2002, China’s middle class was only four percent of its population. A decade later this number had climbed to 31 percent, constituting over 420 million people. China’s growing middle class presents an array of new economic opportunities, but also poses significant political and demographic challenges.

Defining China’s Middle Class
China’s ongoing development has created new economic opportunities in its cities, prompting hundreds of millions of rural Chinese to migrate to urban centers. In just a few decades, China’s urban population skyrocketed from
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of the total population in 1980 to 56 percent in 2015.

As Chinese workers have flocked to cities, wages have grown substantially,
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from 2001 to 2015. Rising wages have led to a steady increase in China’s Gross National Income (GNI) per capita, which now stands at
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. This figure falls between the per capita income of other developing countries like South Africa ($12,100) and Brazil ($14,100), but is significantly lower than the $37,900 average of OECD economies.

China’s urban population skyrocketed from 19 percent of the total population in 1980 to 56 percent in 2015.

A greater demand for labor in China’s coastal cities has disproportionately driven urbanization in eastern provinces, which has exacerbated significant regional differences. China’s coastal provinces often boast
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levels than inland provinces even after taking into account the rural-urban income gap. For example, per capita income among urban residents in the coastal province of Jiangsu is
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($4,025) for urban dwellers in the landlocked province of Guizhou. China’s major cities – particularly Beijing, Tianjin, and Shanghai – have among the highest levels of Gross Domestic Product (GDP) per capita in the country (each at around $30,000), but are still well below those in developed-economy cities such as
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.

Importantly, there is no standard statistical definition of a middle-class level of income, but some metrics use bands to distinguish between several different income groups. For instance, the Chinese government defines incomes ranging from
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($7,250 to $62,500) as middle class. McKinsey uses a range of
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($11,500 to $43,000) per year. To facilitate cross-country comparisons, the World Bank uses a dollar-per-day amount expressed in purchasing-power-parity (PPP) dollars. In 2015,
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to include four additional income levels.



Class Income Bands
Poor <$2
Low $2 – $10
Lower-Middle $10 – $20
Upper-Middle $20 – $50
High >$50


Since the early 2000s, China’s middle class has been among the fastest growing in the world, swelling from
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. Compared to other large, emerging market countries this growth is particularly noteworthy, as Mexico’s middle class only grew from 19 to 34 percent (19 to 42 million) and Indonesia’s only grew from 1 to 10 percent (2 to 24 million) over the same time period.

Most of China’s middle-class growth has occurred within the lower-middle income band. China’s middle-class share of 31 percent of its population is similar to that of the Netherlands (32 percent), but differences emerge when breaking down the middle class into its lower and upper echelons. In China, 75 percent of the middle class falls into the lower income category, while in the Netherlands this figure is only 7 percent. Nevertheless, the emergence of a strong middle class may offer an opportunity for greater political participation for a large segment of the Chinese population whose primary needs are now satisfied.

Spending Habits of the Middle Class
The Chinese middle class is beginning to behave similarly to its counterparts across the world by spending income on a range of goods and services. Middle class spending growth has been primarily driven by consumers in the upper-middle income band, which have a significant amount of disposable income. For instance, passenger vehicle sales in China have experienced growth for 26 straight years, with
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being sold in 2016. For reference, U.S. consumers bought 17.5 million cars in 2016 and Brazilians purchased just 2.5 million automobiles.

Higher incomes have also enabled consumers to be better connected. Since 2006, internet users and mobile phone
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. China’s internet penetration rate has jumped by a factor of five since 2006 when it was at just 10.5 percent, meaning that in 2016 over half of the Chinese population has access to internet. This number significantly trails the OECD internet penetration rate of 77 percent, but is also considerably higher than India’s rate of 26 percent. Notably, internet penetration rates are significantly higher in China cities. For instance, both Beijing and Shanghai have internet penetration rates around 75 percent.
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with E-commerce accounting for 15 percent of total private consumption in 2015 – up from 3 percent in 2010. Enhanced connectivity may also provide members of the middle class with an improved means to advocate for social issues through various digital platforms.

Greater economic means have also created new educational opportunities.
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in Chinese higher education grew from about 5.5 million in 2006 to almost 7.5 million in 2015 – an increase of 35 percent. Students are also flocking overseas for education.
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from about 285,000 in 2010 to over 520,000 in 2015 – with most leaving to study in South Korea, the United Kingdom, Australia, and the United States. As of 2015, China had over
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at the tertiary level, more than the next eight countries combined. By comparison, 234,000 Indian and 116,000 German students studied abroad in the same year.

Chinese are also traveling with increased frequency, as evidenced by a rise of over 185 percent in annual
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Over the same period, annual spending by Chinese travelers
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grew by over 1100 percent – soaring from $20 billion to over $250 billion – with Hong Kong, Macau and Taiwan the top destinations. Chinese are also traveling further afield to locations like Thailand, South Korea, and the Philippines. Over roughly the same period, tourism spending abroad by U.S. citizens grew by 39 percent to $148 billion and spending by E.U. citizens grew by only 8 percent to $382 billion.

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Hendrik_2000

Brigadier
(cont)
Although consumer financing instruments such as credit cards, mortgages, and automotive loans, which are more commonplace in upper-income countries, are on the rise in China, the savings habits of Chinese consumers have yet to reflect those of their foreign counterparts. Chinese households save a greater share of their income than households in other major economies. As of 2015, the average Chinese household saved about
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, the highest of any major economy and in stark contrast with savings rates of 5.2 percent and 1.8 percent for the U.S. and Japan, respectively. These saving habits are in part a necessity due to lower levels of social insurance and were historically promoted by the Chinese government as it set up
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. Today households cite
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as top reasons for saving money.

Asset allocation in China is also different than other countries. Chinese households
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of their wealth in their home, averaging 74 percent compared to 51 percent in the Euro area. Moreover, China has an above average home ownership rate of 87 percent compared to 67 percent in the U.S. Its
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ratio is similarly lower at just 41 percent compared to 80 percent for the U.S.

Social Challenges of the Middle Class
China’s middle class is forecast by McKinsey & Company to
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and comprise 75 percent of urban households. This continued expansion of the middle class presents a host of new environmental, demographic, and social challenges.

The increased consumption levels of the middle class have contributed to environmental stresses. Rising vehicle purchases, higher gasoline consumption, and urban sprawl is resulting in higher CO2 emissions and elevated
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. Dietary preferences have also shifted. A rise
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among the middle class has caused an increase in the intensity of agricultural production and placed a considerable strain on the environment.

McKinsey & Company forecasts China’s middle class to reach 550 million by 2022 and comprise 75 percent of urban households.

This shift in middle-class diets and the sedentary lifestyle often associated with higher income occupations has led to an
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. Diseases that are of the chronic, non-communicable variety are on the rise in China. These same diseases characterize the populations of developed countries and are often expensive to treat. From 2004 to 2014, healthcare expenditure per capita in China increased by over 400 percent.

Healthcare concerns are further compounded by the fact that
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. China’s age pyramid is in the process of inverting, with its dependency ratio expected to increase from 36.6 percent in 2015 to 69.7 percent in 2050. Without vibrant working-age adults to support older generations, the rising social security and healthcare costs of older, retired family members is expected to increasingly burden Chinese households.

Inequality also poses a challenge for China. China’s Gini coefficient, a measure of a country’s income inequality ranked from 0 (perfect equality) to 1 (maximal inequality), has almost doubled from
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in the 1980s to between
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in 2015, considerably
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or Japan’s 0.33. While the rise in inequality partially speaks to China’s previous economic impoverishment, it also reflects the imbalanced growth in the Chinese economy.

The government has taken some actions to strengthen China’s social safety net to better handle a range of social issues. For example, Beijing increased average pensions by
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and also introduced a more general pension that covers workers not participating in the formal economy. Additionally it has extended healthcare coverage to urban non-workers,
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in fourteen provinces and major cities, and passed measures to expand unemployment insurance to migrant workers where previously their benefits would not follow their move to a new city.

Overall government expenditures on social spending
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in 2012 from 6 percent in 2007. While significant, this is noticeably lower than the OECD average of 22 percent. Social welfare reform is also part of the government’s attempt to spur middle class spending and reduce high savings rates. Other measures designed to encourage middle-class spending include
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and
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.
china-power-symbol.svg
 
now I read
China sets up platform to revitalize rust belt
Xinhua| 2018-01-06 14:33:33
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China established an open financial cooperation platform Friday to help revitalize the country's rust belt.

More than 40 financial institutions are involved in the platform, including the China Development Bank and the State Development and Investment Corp. It aims to bridge government agencies, financial institutions and local governments and enterprises in northeast China to help boost the traditional industrial zone.

The rust belt's economy is stabilizing and is ready for investment, said Lin Nianxiu, deputy head with the National Development and Reform Commission (NDRC), adding that the platform should help prevent financial risks and facilitate economic transition.

The region's Heilongjiang, Jilin and Liaoning provinces expanded 6.3 percent, 5.7 percent and 2.5 percent, respectively, in the first three quarters of last year, posting signs of economic recovery.

The platform is open to all financial institutions, according to Zhou Jianping, a senior NDRC official who oversees the revitalization of traditional industrial bases.
 

supercat

Junior Member
China’s Green Opportunity

Jan 8, 2018
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China is now the world’s largest greenhouse-gas emitter, accounting for over 25% of the global total. But the country has also demonstrated a growing understanding that a truly green economy promises to improve quality of life and create enormous opportunities for technological and political leadership.

LONDON – Many recent visitors to Beijing have been pleasantly surprised by blue skies rather than smog. In part, the cleaner air reflects heavy-handed policies: polluting factories have been moved away from the capital and other major cities, and coal-fired heating systems have sometimes been closed down before alternative gas facilities have been put in place. But the change in Beijing also reflects China’s growing understanding that a truly green economy promises not only to improve quality of life, but also to create enormous opportunities for technological and political leadership.

In absolute terms, China is now the world’s largest greenhouse-gas emitter, accounting for more than 25% of the global total. Even in per capita terms, it has just overtaken the European Union average, while still at only half the US level. This reflects an electricity system based 70% on coal, as well as China’s global leadership in heavy industries such as steel, cement, and chemicals. But China is already by far the biggest investor in wind and solar power, and is now canceling plans for further coal investment. And as China builds a low-carbon economy, it enjoys a massive resource advantage.

A
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by the International Energy Agency includes a color-coded map showing which areas of the world have the most wind and solar resources. The largest lies in China’s sparsely populated western provinces of Tibet, Qinghai, Xinxiang, and inner Mongolia. In principle, covering just 5% of that total land area in solar panels could supply China with 6,000 TW hours of electricity per year, meeting its entire current electricity demand (the wind resource is also massive).

Recent auctions in similarly favorable locations – such as northern Chile and Mexico – have produced bids to supply solar power at a price of less than $0.02 per kilowatt-hour, with wind below 2.5 cents. Chinese power investors, in both solar and wind, are certain that within the next ten years they could deliver renewable power to China’s booming coastal regions at a price well below current prices for coal-generated electricity.

Of course, that would require massive investment: China’s National Energy Administration has announced a plan to spend $360 billion on renewable power by 2020. But, relative to China’s total savings and investments (more than $5 trillion per year) and a banking system with total assets over $30 trillion, this level of spending is easily manageable.

As China builds a low-carbon power system, it will reap a major industrial advantage. With lower costs for renewable electricity, the IEA report notes, hydrogen can be produced more cheaply as well, via electrolysis rather than from methane reforming, creating huge opportunities for the decarbonization of steel, fertilizer, and chemical production, and for the possible use of green hydrogen in long-distance trucking and shipping. In a global zero-carbon economy, the logical location to base much industrial production will be where wind and solar power is cheap.

Chinese companies already play a major role in all the major technologies needed to power the green economy, including photovoltaic panels, wind turbines, batteries, and the sophisticated systems required to manage the interaction of intermittent electricity supply and time-varying demand. Support for green technologies also features prominently in the Made in China 2025 program, which aims to push Chinese manufacturing to world-leading scientific and technical standards. And the faster that Chinese policy drives a transition to a low-carbon economy, the greater the technological and economic opportunity.

Electrification of road transport will play a crucial role in delivering improved local air quality, and, when combined with increasingly green electricity, reducing CO2 emissions. Major Chinese companies already play a leading role in the development of electric cars, and Chinese cities are by far the biggest buyers of electric buses. Likewise, Beijing’s increasingly blue skies benefit from the fact that almost all of its two-wheel motorized vehicles run on electricity, not gasoline. And the major Chinese tech companies, like their US rivals, are investing heavily in autonomous driving technology and ridesharing systems.

In electric transport, Chinese companies are as well placed as their European and American counterparts to innovate and be globally competitive. By contrast, it would take many years to match the expertise that Western car companies have developed over a century of producing internal combustion engines. So the faster the Chinese economy moves to electric transport, the better placed Chinese companies will be. The government has stated that it will soon set a date beyond which no fossil-fuel cars may be sold in China. A fair bet is that it will shock the world by announcing a date far earlier than 2040, the deadline set by both France and the United Kingdom, in order to gain not just cleaner air but also a competitive advantage.

Accelerated Chinese progress toward a green economy could deliver a significant political advantage as well. President Xi Jinping aspires to make China an attractive economic and social model for others to emulate, seizing the opportunity created by US President Donald Trump’s tarnishing of the American brand to boost Chinese “soft power.” Many features of China’s political system impede that goal. But China could become a highly respected and admired leader in the fight against global climate change.

We should not be surprised if, within a decade, Beijing’s bright blue skies prove to be a harbinger of Chinese technological leadership in all aspects of the green economy. Nor should we be shocked if Xi’s commitment to build an “ecological civilization” turns out to be more than just empty words.

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So scared of competition. China should shut Apple out of China until the US reciprocates with Huawei.

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“Political pressure” reportedly kills Huawei/AT&T smartphone deal
Spying concerns from members of congress means AT&T won't be selling Huawei phones.

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- 1/9/2018, 10:50 AM
Huawei-Mate-S_Colors-640x423.jpg

The Huawei Mate S.
Reports from
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and other outlets say that AT&T was ready to announce a distribution deal with Chinese smartphone maker Huawei, but the deal fell through at the last minute.

The deal would have seen Huawei phones bundled with service deals in AT&T stores, as carrier stores are the primary way US consumers buy phones. The two companies were ready to announce the deal at the currently ongoing CES trade show in Las Vegas.

Huawei is the number three smartphone vendor worldwide, behind only Apple and Samsung, but the company struggles in the US. Huawei currently sells to consumers online, but the lack of carrier deals has made the company basically irrelevant in the US market. Outside of the US, Huawei is a massive company, making not only phones but also its own line of "HiSilicon" SoCs. The company the largest telecommunications equipment manufacturer in the world, but
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about Huawei's relationship to the Chinese government has mostly kept its equipment out of the US.

A report from
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claims that the same "political pressure" situation happened here. Apparently members of the US Senate and House Intelligence Committee sent a letter to the FCC citing a committee report of Huawei's alleged ties to the Chinese government, and the letter said that "additional work by the Intelligence Committees on this topic only reinforces concerns regarding Huawei and Chinese espionage."

Huawei has continually denied allegations that it spies for China.
 
now I read
China relaxes regulations for investors in free trade zones
Xinhua| 2018-01-09 21:09:28
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The State Council has decided to ease regulations for enterprises investing in free trade zones (FTZs) to promote reform and opening up, a notice said Tuesday.

According to the decisions endorsed by Premier Li Keqiang, China will allow wholly foreign-owned entertainment venues to provide services in FTZs and permit foreign investors to invest in Internet access businesses.

The country will remove the restriction that at least 70 percent of equipment in foreign-funded urban-rail traffic projects should be made in China.

Wholly foreign-owned companies were allowed to open gas stations and to design, produce and repair aircraft with a maximum takeoff weight of 6 tonnes.

Investment proportions limitations on helicopters with a takeoff weight of at least 3 tonnes were also lifted.

Foreign investors were also allowed to be controlling shareholders in International shipping agencies.

China's FTZs, which have expanded from the first in Shanghai to the current 11 across the country, are a way of testing new policies, including interest rate liberalization and fewer investment restrictions, to better integrate the economy with international practices.
 

Equation

Lieutenant General
So scared of competition. China should shut Apple out of China until the US reciprocates with Huawei.

Please, Log in or Register to view URLs content!


“Political pressure” reportedly kills Huawei/AT&T smartphone deal
Spying concerns from members of congress means AT&T won't be selling Huawei phones.

Please, Log in or Register to view URLs content!
- 1/9/2018, 10:50 AM
Huawei-Mate-S_Colors-640x423.jpg

The Huawei Mate S.
Reports from
Please, Log in or Register to view URLs content!
and other outlets say that AT&T was ready to announce a distribution deal with Chinese smartphone maker Huawei, but the deal fell through at the last minute.

The deal would have seen Huawei phones bundled with service deals in AT&T stores, as carrier stores are the primary way US consumers buy phones. The two companies were ready to announce the deal at the currently ongoing CES trade show in Las Vegas.

Huawei is the number three smartphone vendor worldwide, behind only Apple and Samsung, but the company struggles in the US. Huawei currently sells to consumers online, but the lack of carrier deals has made the company basically irrelevant in the US market. Outside of the US, Huawei is a massive company, making not only phones but also its own line of "HiSilicon" SoCs. The company the largest telecommunications equipment manufacturer in the world, but
Please, Log in or Register to view URLs content!
about Huawei's relationship to the Chinese government has mostly kept its equipment out of the US.

A report from
Please, Log in or Register to view URLs content!
claims that the same "political pressure" situation happened here. Apparently members of the US Senate and House Intelligence Committee sent a letter to the FCC citing a committee report of Huawei's alleged ties to the Chinese government, and the letter said that "additional work by the Intelligence Committees on this topic only reinforces concerns regarding Huawei and Chinese espionage."

Huawei has continually denied allegations that it spies for China.

Same thing happens when the US blocks Huawei and ZTE network vendors away from entering the US market.
 

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