U.S. Hits Major Chinese Tech Company ZTE with Export Ban
On April 16th, the US Department of Commerce forbade ZTE Corp. , a state-owned Chinese telecommunications equipment and systems company, from acquiring components from American suppliers for a period of seven years. The ban was issued as a punishment for ZTE’s failure to redress its violation of US sanctions against Iran and North Korea.
Last year, a US investigation found ZTE had illegally shipped telecommunications equipment to Iran and North Korea. While the Chinese company agreed to pay a $1.2 billion fine later, it did not take efforts to discipline relevant staffs as promised and lied to the US officials about its actions, according to the Commerce Department.
"ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand," said the Commerce Department in a statement explaining the ban against ZTE.
In response, ZTE said on April 20th that the US sanction is "extremely unfair” and could threaten its survival and meanwhile adversely affect American companies.
"Such sanctions could put the company immediately into a coma," said Yin Yimin, Chairman of ZTE, at a press briefing. "We resolutely oppose such an unfair, unreasonable punishment, and especially the act of politicizing trade issues."
About 30 to 40 percent of components of ZTE products are imported from the US. Analysts point out that without US-made chips and other crucial components, ZTE is expected to be hard-pressed to meet its network equipment and smartphone orders around the world, as well as to push forward its 5G-related research and development.
In its statement, ZTE uses its cooperation with Qualcomm and Google as examples to illustrate how the export ban could in turn “cause damages to a large number of US companies.”
Qualcomm, one of supplies to ZTE, dropped 1.7 percent after the US announced the ban. Analysts said it might be hardest hit at a nominal level but not in relative terms, concerning that a series of Qualcomm’s competitors are faced with an even worse situation.
The Chinese government has promptly expressed its concerns over the US ban against ZTE and said it would closely follow the developments.
"ZTE has a wide range of trade and investment cooperation with several hundred American companies, providing the United States with thousands of jobs," the Chinese Ministry of Commerce said in a statement the next day the US imposed the sanction on ZTE.
"We stand ready to take necessary measures to protect Chinese companies' legitimate rights and interests," warned the Ministry of Commerce.
The Ministry of Commerce confirmed on April 19th that it had extended its scrutiny of US chip maker Qualcomm’s proposed acquisition of Dutch semiconductor company NXP due to “market competition problems”. Some analysts consider it a preliminary retaliation from China.
The US move has also triggered patriotic rhetoric in China. In one widely circulated photograph online, an unidentified restaurant erected a banner with patriotic slogans, saying: "If it were not because of ZTE's strength and ability to represent China, it would not have been punished like this."
There is also reflection on the Chinese dependence on the US in the areas of high-tech.
"From this (event), I learned how big a gap there is between China and the US in tech development," a social media user said.
"Only when you have high-tech can you have a say." Another user commented.