ANTIQUES SHOPS

Huawei and cross-town rival ZTE Corp 000063.SZ (0763.HK) have come under close scrutiny by U.S. lawmakers and the European Commission, which say both are able to use subsidies to bid for contracts at lower prices than Western competitors.

Both companies rose to prominence rapidly over the past few years, clinching contracts with major telecom carriers and sometimes edging out European rivals Ericsson (ERICb.ST), Alcatel Lucent SA (ALUA.PA) and Nokia Siemens Networks NOKI.UL.

"It's not true that Huawei uses subsidies to gain market share," Chen Lifang, Huawei's global board director, told Reuters in an interview on the sidelines of a business event at St Petersburg in Russia.

"We receive legal subsidies. Like European countries, China also gives out subsidies for R&D-related activities. Huawei has taken part in such European and Chinese schemes," said Chen, a member of Huawei's 13-person board.

Huawei, together with the world No. 5 telecom equipment maker ZTE, denied accepting illegal subsidies earlier this year, but this is the first time a Huawei board member has commented about the issue.

The head of the U.S. House of Representatives' Intelligence Committee this week said apart from the investigation on subsidies, legislation could be proposed to deal with any related national-security threats.

In May, EU diplomats said the trade bloc would like to take action against Huawei and ZTE on the grounds that they receive illegal state subsidies that allow them to sell equipment at lower prices.

Analysts said Chinese telecoms equipment makers had also the support from policy banks, such as China Development Bank CHDB.UL, which provided low interest rate loans for network infrastructure projects in emerging economies.

Chen brushed off rumors that Huawei did not need to pay back such loans.

"Our competitors even spread rumors that we needn't repay these loans. This is impossible and untrue," she said late on Friday.

She said Huawei usually worked with Chinese and foreign banks in project financing and loans, and was transparent in the process.

In 2011, Huawei borrowed $4.6 billion from banks, with more than 70 percent from overseas banks and less than 20 percent from Chinese lenders, Chen said.

"These banks usually make necessary risk assessments before agreeing to the loans. All of such loans have also been audited."

Huawei has been successful in selling telecom equipment in Europe and emerging economies in Asia and Africa, expanding its presence in the mobile phone and enterprise segments.

In Russia, for instance, Huawei has worked closely with major carriers and is in negotiations to possibly provide equipment for 4G LTE (fourth-generation long term evolution) mobile technology, Xiong Lening, chief of Huawei's Russia operations, has said.

However, the prized U.S. telecom carrier market remains elusive for the Shenzhen-based company that was started by its Chief Executive Officer, Ren Zhengfei.

Ren, who is also in Russia this week for the event, was a former military officer who was laid off by the People's Liberation Army in a downsizing exercise over 20 years ago.

Several years ago, Huawei and ZTE were blocked from taking part in a bidding process for a network project by U.S. carrier Sprint Nextel Corp (S.N) due to national security concerns.

More recently, Huawei was blocked from participating in a tender in Australia's $38 billion National Broadband Network due to cyber security concerns.

"It's supposed to be straightforward commercial transactions, but the U.S. likes to link economic issues to politics because Huawei has its roots in China," said Chen, who joined Huawei in 1995.

"Our competitors also take advantage of this fact to paint an unfriendly image of us."

Huawei has denied having any ties with the Chinese military.

After years of rapid expansion and market share gains in the telecom equipment and mobile phones sectors due to aggressive marketing and pricing, Huawei's profitability has been hit lately with rumors surfacing of massive layoffs.

Chen brushed off such concerns.

"We are not laying off staff in China or India. In Russia, we're expanding and might even add staff," she said, but stopped short of elaborating.

(Reporting by Denis Pinchuk; Writing by Lee Chyen Yee; Editing by Ed Lane)

Investment banks are undergoing wrenching change as weak financial markets force companies to pull back on raising capital and striking deals, cutting the flow of fee income that had formed the lifeblood of the business.

"The industry will end up with a barbell of a small number of these enormous, essentially commercial banks, which have investment banking operations," said Stephen Jennings, chief executive of Russian group Renaissance.

"On the other end, you will have much smaller, more entrepreneurial, primarily private businesses, and the accent will be on relationships, reliability, high levels of service, entrepreneurialism, which harks back to an earlier era.

"The killing zone will be in the middle."

Global mergers and acquisitions activity, a driver of investment banking fees, fell 25 percent worldwide in the first half of 2012, according to Thomson Reuters data.

Global equity fundraising, including IPOs and secondary offerings fell 25.8 percent in the period.

"The last thing you want to be right now is a pure-play investment bank," said Jennings, who co-founded Renaissance in 1995 and now presides over a business that stretches from Moscow through sub-Saharan Africa and Asia.

"The investment banking industry globally is hugely oversized, it has been a massive bubble. It probably was one of the best industries to be in and now is one of the worst."

The New Zealander has diversified Renaissance so that only 20 percent of its value is in the investment bank - other parts include consumer finance, asset management, real estate and wealth advice. The bank is doing better financially than a year ago, he said.

"The key is who can strategically reposition themselves for what is a vastly different world," said Jennings.

Renaissaince's investment banking unit, Renaissance Capital, has cut 12 percent of its investment banking staff globally, with 40 staff dismissed in Moscow, a source familiar with the situation said last month.

Costs are now at a level appropriate for current market conditions, said Jennings.

"The global banks have to cut and consolidate, but for them it takes longer and it is harder to do. We can cut a product line and a country and make decisions to invest."

This is not the first tough period Jennings has navigated through. In the 2008 financial crisis, he sold half Renaissance Capital to Russian billionaire Mikhail Prokhorov, whom he said was a "very good shareholder to have, particularly in such difficult markets".

"I am very comfortable with the relationship. We have been through a lot in the last four years."

Prokhorov's Onexim group bought a stake of 50 percent minus one share in Renaissance Capital, while Renaissance Group owns the rest. Onexim later become a minority shareholder in Renaissance's credit business and its agribusiness operations in Ukraine.

DEAL VOLUME

While it was hard to predict when IPO activity will recover, Jennings said he saw M&A increasing as Russian industry, such as the steel sector, restructured to spin off transportation and logistics operations.

"I would say the M&A pipeline we have now is as good as we have seen in quite a number of years," said Jennings, citing the transport sector, rail and telecoms area as promising for deals.

Russia's largest steel maker, Evraz (EVRE.L), this week put its Evraztrans unit up for sale, joining a sector trend to shed non-core operations.

Apart from a handful of large situations, such as a shareholder dispute at British oil major BP's (BP.L) Russian venture TNK-BP (TNBP.MM) and the recent restructuring of mobile operator Megafon MGFON.UL, M&A in Moscow has had a quiet year.

The government's industrial strategy has yet to take shape following the return of Vladimir Putin as president, with some officials calling for a resumption of privatization efforts and others seeking to tighten state control over energy.

"It seems very likely the state is going to consolidate assets in certain industries," said Jennings.

"In other industries I think we will see more privatization. Over time some of these really big state entities (will see) partial privatizations."

(Reporting by Megan Davies; Editing by Douglas Busvine and Dan Lalor)