December 6, 2012 2:22 am

ZTE secures $5bn from Beijing-backed bank

ZTE Corporation, the struggling Chinese handset and telecoms equipment maker, has secured an additional $5bn of funding from China Development Bank, the state-backed financial institution.

The Shenzhen-based company, which has been forced to issue profit warnings given a slump in its core infrastructure business, already had a financing facility with China Development Bank (CDB) of $15bn.

The additional funding at a difficult time for the group will raise further questions about the separation between the Hong Kong-listed ZTE and the state, with allegations in the US in particular about connections with government entities. Earlier this year, a US Congress report said that ZTE and rival Huawei posed a national security threat.

CDB said that it would use its strengths in integrated financial services to help ZTE achieve its strategic goals, and drive ZTE’s overseas investment and business development in priority sectors.

Hou Weigui, chairman of ZTE, said: “ZTE will leverage the CDB’s financial support and grasp the opportunities in the markets for 4G, fixed broadband, enterprise networks and terminals, consolidate our advantages and migrate to the higher value solutions, as we aim to achieve a global top 3 position before 2015.”

ZTE acknowledged the worsening trading conditions, saying that the expansion of the strategic partnership was a sign of CDB’s confidence in ZTE “as the uncertain economic recovery in the United States and the debt crisis in Europe weaken growth in the global telecommunications market”.

China’s second-largest telecom equipment maker by revenue warned last month of a net loss in the third quarter that would erase its first-half profit, causing its shares to drop almost 16 per cent in Hong Kong.

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