China's real telecom subsidies

The least surprising story of the month: the EU’s assault on Chinese subsidies to telecom vendors has been put on hold.

The Financial Times, which broke the news of a planned WTO case, says European governments have become skittish following Beijing’s threatened retaliation.

At a heated meeting last month the Chinese reportedly said they would respond to any case against Huawei and ZTE by probing EU subsidies to “agriculture, automotive, renewable energy and telecoms companies.”

One suspects the original story was leaked precisely in order to secure that reaction. Even Ericsson, the biggest European vendor, is against the idea.

We don’t know what the alleged subsidies were, but we can guess they might include the mammoth credit lines from state-owned banks and possibly direct state payments to back favoured projects. It’s a pity they weren’t leaked, too, but clearly the Europeans are in no state for a fight.

But whatever subsidies Beijing is or isn’t paying, they surely pale beside the perfectly legal subsidies of TD-SCDMA from China’s Mobile shareholders and customers.

They helped the operator pump 180bn yuan ($28.3bn) into a network of 220,000 TD-SCDMA base stations, and another 30bn yuan into handset subsidisies, according to this Chinese press report.

For investors, TD-SCDMA also had the unintentional effect of turning China Mobile's much smaller rival, China Unicom, into a serious competitor.

With TD-LTE on the way, further opportunities open up for both stockholders and consumers to contribute to this indigenous innovation icon.

Whatever one thinks of the 'China model' of economic development, they've certainly figured out how to leverage scale.