CHINA Gas Holdings Ltd. is holding fast to a strategy to expand in rural markets deemed too challenging by its rivals, and is evoking the experience of national technology giant Huawei Technologies Co. to help make its point.

The firm has made a name for itself as China’s biggest gas distributor by switching rural households from burning coal to using more of the cleaner fuel. Analysts have warned of the risks associated with the strategy, with Sanford C. Bern- stein calling it the “biggest controversy” on the stock.

“People have asked me: is there really gas demand in China’s rural areas?” executive chairman Liu Minghui said, adding the company has done a thorough analysis of the market. Huawei encountered similar concerns in its early days, Liu said. “Huawei didn’t listen to them and that turned out to be the right decision.”

Huawei, founded in 1987, has grown from a small seller of phone switches in rural China to the world’s largest maker of telecommunications equipment. It has come under increased scrutiny in recent times amid U.S. efforts to curb its business.

In terms of gas use, there is precedence in other countries. Consumption tends to take off in large population centers first, then expand to smaller cities and rural regions, Liu said from the company’s headquarters in Shenzhen, where Huawei is also based.

That has been the case in Europe and North America, and China will be no exception, according to Liu. Rural incomes have also improved in the past 10 years, he added.

Gas consumption is booming as the government seeks to combat pollution. State-ordered replacements of coal-fired boilers with natural gas furnaces have spawned an increase in demand for services provided by distributors such as China Gas, ENN Energy Holdings Ltd. and China Resources Gas Group Ltd.

This has come in spite of a slowdown in the world’s second-biggest economy. While figures showed China slowing to a record-low pace in the second quarter amid the trade war with the United States, natural gas consumption rose 11 percent year on year in the first half following an 18 percent increase in all of 2018 and 15 percent the year before. (SD-Agencies)