A Chinese industrial champion opens up a bit on its way to world domination
Apr 20th 2011 | HONG KONG | from the print edition
ANOTHER annual report sent out in the season when countless companies worldwide are publishing them is at risk of being filed in the bin. Not so if the company is Huawei and the report is intended to make a company that reflects the best of China’s manufacturing prowess, while being a prime example of its secretiveness, seem normal.
The telecoms-equipment maker’s financial performance is impressive enough to make the report worth reading: revenues were 185 billion yuan ($27.4 billion), having grown by an annual average of 29% in the past four years. The growth rate for profits has been 56%. Having just passed Nokia and Siemens, Huawei looks on track to overtake Ericsson, the industry leader, this year.
But it faces some big impediments, perhaps the most important being the concerns of many governments, notably America’s and India’s, about a private company suspected of links to the security apparatus of a country said to be conducting sophisticated hacking. Because of such worries, Huawei’s efforts to buy American companies have been blocked and some sales have been lost.
The report is clearly an effort by Huawei to lay such concerns to rest. For the first time, its directors are named and given brief biographies. The rags-to-riches story of Ren Zhengfei, the chief executive, is fleshed out: the son of rural schoolteachers, he left the army in 1983, founding the company with savings of 21,000 yuan four years later. None of the other directors is said to have military ties. However, a somewhat conspicuous omission from the profile of Sun Yafang, the chairman, is that—according to a report in the Financial Times—she used to work for the Ministry of State Security. That three other directors are (according to the Chinese press) closely related to Mr Ren is also omitted.
The report is a bit more forthcoming on the financial help Huawei gets from the state: plentiful cheap loans, some at interest rates of less than 1.7%, and a handy chunk of research grants. The audit of the firm’s accounts, by KPMG Huazhen, was unqualified, though the auditor noted that they did not contain all the information needed to meet international accounting standards for a full company report.
Huawei still has some way to go before it satisfies the curiosity of foreign governments, competitors and investors. Even so, the information given in this year’s annual report represents a leap forward in openness for the company and for Chinese industry as a whole. In recent years Huawei has decisively dispelled any doubts that it can provide state-of-the-art communications equipment. The job of communicating about itself remains a work in progress.