Huawei was founded in 1987 and it is well established that the Chinese Government “helped” at several points in its early history. There are dozens of articles on Huawei that start like this:
While no direct ties between Huawei and the Chinese military and Communist Party have ever been established beyond (founder and) CEO Ren Zhengfei’s past ties to both, the fast-growing telco supplier’s ownership structure is still fascinating, strange and tricky for Western observers to understand.
Huawei states that they are 98.6% employee owned but neither employees or anyone else can buy shares. Shares are “issued” to employees annually based on their perceived merit. As staff exit the company most are required to sell their shares back to Huawei. Officially, once per year KPMG calculates the value of a share by estimating the the value of the company and then dividing by the number of outstanding shares but to our knowledge there is no official price listing and no appeal process for the value of Huawei shares.
The problem with this notion of stock only being given away for free to the staff, is that if no-one is putting money into the company they have to live off of their profits. As we explain in our “10 Short Answers To Why Huawei is so Scary To Western Countries” article, Huawei may produce a high quality product, but they deep discount it relative to the competition so they just can’t be making the massive profits they would need fund operations. What makes this even more hard to believe is that the industry they are in, telecommunications, has high Research and Development costs so tech companies like Huawei need vast sums of investment to get stay ahead of the competition.
Even more odd is that only Chinese citizens are issued Huawei shares. The assumption in the West has been that this is to ensure that only Chinese regulators can look into financial questions and Chinese regulators are most definitely not independent from the Chinese central government. We can find no reason to argue with that logic.
If the rank and file staff do get any real value from their shares, it is monetary only:
The US House intelligence committee said “many analysts believe that Huawei is not actually controlled by its common shareholders, but actually controlled by an elite subset of its management”. Huawei concedes that Mr Ren (founder with 1.4% ownership) retains veto power over major decisions.
Huawei may officially be an employee owned venture but they have tremendous access to the China Development Bank (CDB) which IS the Chinese central government. For example, in 2009 Huawei was given a $30 BILLION (yes, that is a lot of money) line of credit for the CDB. This was an expansion of their 2004 $10 Billion CDB loans.
Huawei is often indirectly funded by having the Chinese Export Import Bank (Exim Bank) provide the risk free financing to non-Chinese companies that buy from Huawei. For instance, Nigeria received $200 million in low interest loans to buy Huawei hardware.
Here is yet another head scratcher. Surf to the CDB website and do a search for the word Huawei. It is mighty odd that it returns zero results. You would think if you were lending a legitimate company vast sums of money, you would have lots of documentation and even promotion of the loans on your website.
It is also known that Huawei also receives funding from large Chinese Military contracts. Most notably, the usually reliable RAND Corporation released a report that states:
“Huawei continues to receive contracts from the Chinese military to develop dual use communications technologies. As of January, 2018, Huawei remained active in the 863 funding program. In particular, it is helping develop 5G networks with military applications in mind.”
Huawei is the 72 largest company on the planet with $90 Billion dollars in sales. All companies of that size are publicly traded entities. However Huawei management remains evasive about why they are not a publicly traded company:
“We will choose the most suitable model for Huawei at varied developmental stages,” said company spokesman.
It is believed by most that Huawei’s internal financial operations are intentionally opaque to make it impossible for outsiders to accurately criticize them.
There is an old saying business and politics; ‘sunshine is the best disinfectant’. The bottom line is who ever really owns/controls them is still very unclear and that scares many who have learned from history that dark finances often cover dark secrets.
This is our third report in our series on the largest telecom company in the world. Our other two are: