US ban on sales to ZTE triggers patriotic rhetoric in China

The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the US, as it is estimated to rely on US firms for nearly a third of crucial components such as chips in its products. (Reuters)
Updated 19 April 2018
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US ban on sales to ZTE triggers patriotic rhetoric in China

  • An unidentified restaurant erected a banner with patriotic slogans calling for solidarity and offering ZTE employees free meals
  • The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the United States

HONG KONG: A US ban on sales of American components to ZTE Corp. has unleashed a patriotic backlash in China’s cyberspace, highlighting the growing tension between the world’s two largest economies.
The US this week imposed a ban on American companies selling parts and software to ZTE for seven years, saying it had broken a settlement agreement with repeated false statements — a move that threatens to cut off the Chinese firm’s supply chain.
Sympathy for ZTE has swept Chinese social media while most domestic newspapers have chosen to put the lion’s share of the blame for the telecom equipment maker’s troubles on China’s heavy reliance on foreign semiconductors.
The US action comes at a time when the two countries have threatened each other with tens of billions of dollars in tariffs in recent weeks, fanning worries of a full-blown trade war.
In one widely circulated photograph online, an unidentified restaurant erected a banner with patriotic slogans calling for solidarity and offering ZTE employees free meals.
“If it were not because of ZTE’s strength and ability to represent China, it would not have been punished like this,” the banner said.
A photograph purportedly showing ZTE’s 76-year-old founder Hou Weigui with senior executives at a mainland airport about to catch a flight to the United States also prompted a torrent of messages of support.
“Trying so hard, bearing so much, all to fight for China’s interest — how touching!” said one popular comment that played on a comparison with a late Qing dynasty official, Li Hongzhang, a chief negotiator in the first Sino-Japanese war.
The state-run Global Times said in an article this week that the move against ZTE was a strong push for China to strengthen its domestic chip industry. China’s semiconductor-related imports from the United States last year came to $11 billion.
Nineteen stocks related to semiconductors listed on the mainland rose by their daily limit on Wednesday.
Separately, a company source said on Thursday ZTE’s chief compliance and chief legal officer was removed from his posts more than a month before the Chinese telecom equipment maker was slapped with US sanctions this week.
Citing an internal memo dated March 8, the source said Cheng Gang, ZTE’s chief compliance and chief legal officer, was “removed from his posts” more than a month ago, although that the memo did not give a reason for the action.
It was not clear if Cheng was still with the company, according to the source, who declined to be identified as the information in the memo was confidential.
Cheng did not respond to an email and a LinkedIn message seeking comment. Reuters was unable to obtain a phone number for Cheng. ZTE did not respond to calls and emails seeking comment.
News of the memo was first reported by the South China Morning Post.
China’s No.2 telecoms equipment maker admitted in March 2017 to illegally shipping US technologies to banned countries including Iran and paid a record $890 million fine to settle the case.
As part of the agreement, Shenzhen-based ZTE promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, but had failed to fully carry out those actions, US government officials told Reuters this week.
The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the United States, as it is estimated to rely on US firms for nearly a third of crucial components such as chips in its products.
ZTE has delayed its earnings results, originally scheduled for Thursday, saying it needs time to assess the impact of the US sanctions. Its shares in Shenzhen and Hong Kong remain suspended.


China praises positive steps in US trade row

Updated 26 sec ago
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China praises positive steps in US trade row

  • “Despite all the pressure, China didn’t ‘fold,’ as US President Donald Trump observed. Instead, it stood firm and continually expressed its willingness to talk,”
  • “The Chinese are in a state of quiet glee knowing that Trump’s trade team backed off on sanctions without getting any real and meaningful concessions out of Beijing,”
BEIJING: Chinese state media on Monday praised a significant dialing back of trade tension with the US, saying China had stood its ground and the two countries had huge potential for win-win business cooperation.
A trade war was “on hold” after the world’s largest economies agreed to drop their tariff threats while they work on a wider trade agreement, US Treasury Secretary Steven Mnuchin said on Sunday.
The previous day, Beijing and Washington said they would keep talking about measures under which China would import more energy and agricultural commodities from the US to narrow the $335 billion annual US goods and services trade deficit with China.
The official China Daily said everyone could heave a sigh of relief at the ratcheting down of the rhetoric, and cited China’s chief negotiator, Vice Premier Liu He, as saying the talks had proved to be “positive, pragmatic, constructive and productive.”
“Despite all the pressure, China didn’t ‘fold,’ as US President Donald Trump observed. Instead, it stood firm and continually expressed its willingness to talk,” the English-language newspaper said in an editorial.
“That the US finally shared this willingness, means the two sides have successfully averted the head-on confrontation that at one point seemed inevitable,” it said.
During an initial round of talks this month in Beijing, the US demanded that China reduce its trade surplus by $200 billion. No dollar figure was cited in the countries’ joint statement on Saturday.
But some analysts in Beijing warned that trade tension would persist, and that China should prepare for more action on trade from the Trump administration.
“We should not be blindly optimistic,” Shi Yinhong, an expert on China-US relations at Renmin University in Beijing said at a forum on Sunday after the trade agreement was announced.
“Blind optimism (could lead to) China losing at this crossroads.”
Shi said China could accept a lower trade surplus and reduce its market entry barriers, but would not compromise on its industrial policy.
The ruling Communist Party’s People’s Daily said that in the energy and agriculture sectors the two countries had obvious synergies, with the US having the capacity to satisfy the massive Chinese market.
“The ballast stone of Sino-US ties are an equal and mutually beneficial trade and business relationship. Its essence is win-win cooperation,” it said.
But China was not being forced to increase imports as a way to ward off the trade tensions or because the country had submitted to outside pressure, the newspaper said in a commentary.
China will naturally need to import more to satisfy demand from its increasingly affluent consumers, the newspaper wrote.
“Trade wars have no winners,” it added in the commentary, published under the pen name “Zhong Sheng,” meaning “Voice of China,” used to give the paper’s view on foreign policy issues.
However, some people in US business groups, who had been pushing for tougher US policies to pressure China to reform market barriers, expressed frustration and disappointment, saying it would be hard for the administration to rebuild momentum to take on Chinese industrial policies.
James Zimmerman, a Beijing-based lawyer and a former chairman of the American Chamber of Commerce in China, said the Trump administration’s move to walk back its threatened trade actions was premature, and a “lost opportunity” for American companies, workers and consumers.
“The Chinese are in a state of quiet glee knowing that Trump’s trade team backed off on sanctions without getting any real and meaningful concessions out of Beijing,” Zimmerman said.