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.


Oil prices mixed as Trump calls on OPEC to lower prices

Updated 5 min 27 sec ago
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Oil prices mixed as Trump calls on OPEC to lower prices

  • OPEC and its allies are scheduled to meet on Sunday in Algeria
  • They are not likely to agree to an official increase in crude output at this weekend’s meeting
SEOUL: Oil prices were mixed on Friday after falling in the previous session as US President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend.
International benchmark Brent crude for November delivery was up 5 cents at $78.75 a barrel by 0424 GMT.
US West Texas Intermediate crude for October delivery fell 8 cents to $70.24 a barrel.
Trump called on the Organization of the Petroleum Exporting Countries (OPEC) to lower prices, saying on Twitter “they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices.”
OPEC and its allies are scheduled to meet on Sunday in Algeria to discuss how to allocate supply increases to offset a shortage of Iran supplies due to US sanctions.
Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore, said Trump’s remarks just days before the OPEC meeting put “a focus on the likely supply impacts of US-led Iran sanctions.”
“The market had until that point been trading fluidly with the assumption that Saudi Arabia is now comfortable with Brent at $80 or even higher, which is challenging the market’s long-held supposition that prompt Brent between $70 and $80 was OPEC’s sweet spot,” Innes added.
Brent has been trading just below $80 a barrel, backed by concerns of supply shortages from looming US sanctions against Iran, which are set to take effect in November.
“Iranian crude exports are coming earlier and bigger-than-expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks,” according to a report by ANZ Bank.
Although supply worries have pushed up oil prices, OPEC and its allies were not likely to agree to an official increase in crude output at this weekend’s meeting, OPEC sources said.