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EU drops investigation into Chinese telecoms

European Union and Chinese government strike a deal to end an investigation into whether Chinese telecom equipment makers, including Huawei and ZTE, received illegal subsidies.

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Imports of Chinese telecom equipment into the EU are worth over 1 billion euros a year, according to the EU. JOHANNES EISELE/AFP/Getty Images

The European Union and the Chinese government have settled a year-long dispute over the possibility of Chinese telecommunications companies receiving illegal subsidies to compete more effectively in Europe.

The EU and China met at a regular Joint Committee over the weekend and discussed issues the EU had raised about Chinese telecommunications companies, including whether equipment makers Huawei and ZTE had received illegal subsidies. Last year, the EU launched an investigation to determine whether certain European companies and Chinese companies worked together to bring telecommunications gear to their markets at a cheaper price. The investigation focused on equipment carriers need to build out mobile networks and provide wireless service, and not consumer equipment, such as phones and modems.

The investigation ended with an "amicable" settlement between the countries.

"The EU pursues every opportunity to level out the playing field for our companies by engaging with our strategic partners including China," said Karel De Gucht, EU trade commissioner, in a statement on Monday. "The concerns that have led us to launch the case last May can now be addressed in a systematic and regular dialogue between the two sides for the benefit of our industry."

Huawei and ZTE provide telecommunications equipment to countries across the Euro zone, and imports of Chinese telecom gear into the EU are worth over 1 billion euros a year, according to the EU. While the two companies have seen their telecommunications equipment largely banned from the US due to concerns it could be used by the Chinese government to spy on companies and individuals, Huawei and ZTE have grown fast in the EU.

The European Union was especially concerned with Huawei's meteoric growth in the European telecoms market, according to a document obtained by Reuters. In 2006, the company held just 2.5 percent share. As of this writing, its market share is at 25 percent and growing fast.

The EU argued that the only way Huawei could have grown so rapidly is through its subsidies. Huawei, however, said it has received no illegal subsidies and believes its success is partly due to cheaper pricing and partly due to its products.

Under the terms of the deal signed between China and the EU, an independent body will monitor the telecoms networks market to ensure no illegal activity is ongoing. European companies can also access China's standard-setting body and all firms will receive equal treatment in competitive bids, said the EU.