How the Journal Calculated Huawei’s State Support - Wall Street Journal

Huawei’s Mate30 5G mobile phone is displayed at a store in Nanjing, China, in late October. Photo: Yang Suping/SIPA Asia/Zuma Press

Dec. 25, 2019 8:33 am ET

In the two decades since Huawei Technologies Co. began venturing beyond China, the company tapped ever larger benefits from China’s policies to nurture national champions.

Huawei’s founder and CEO, Ren Zhengfei, said earlier this year that Huawei doesn’t rely on state aid, which a Huawei spokesman later said meant “no special government aid.”

Huawei provides relatively limited disclosures on state incentives it receives. A Wall Street Journal review showed Huawei received as much as $75 billion in state financial assistance, including tax savings, state credit facilities, land purchases and government grants.

Huawei doesn’t rely on state aid, its founder and CEO, Ren Zhengfei, said earlier this year. A Huawei spokesman later said this meant “no special government aid.” Photo: alex plavevski/epa/Shutterstock

In its methodology, the Journal sought to estimate how key state fiscal incentives, adjusted to account for changes in their scope over the years, allowed Huawei to spend more freely. The calculations compared Huawei’s tax payments with the company’s projected tax liability in the absence of such incentives.

The Journal’s review excluded other forms of policy support available to Huawei, such as salary tax benefits, property-tax abatements and subsidized raw materials. The review also excluded tax breaks arising from standard accounting policy, such as tax deductibility for expenses including research and development, business and administration.

The Journal used third-party loan databases, company records and state media reports to calculate state loans made available to Huawei. The Journal’s review was based on the face value of the loans, which aren’t equivalent to subsidy amounts.

For grants, the Journal relied on Huawei’s disclosures in annual reports since 2008. For land acquisitions, the Journal examined available state records, compared with prices of similarly zoned nearby property, according to Chinese property-value databases.

—Chuin-Wei Yap

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