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.


Japan, EU to sign widespread trade deal eliminating tariffs

Updated 42 sec ago
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Japan, EU to sign widespread trade deal eliminating tariffs

  • Both sides are heralding the deal, which covers a third of the global economy and more than 600 million people
  • Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal
TOKYO: The European Union and Japan are signing a widespread trade deal Tuesday that will eliminate nearly all tariffs, seemingly defying the worries about trade tensions set off by President Donald Trump’s policies.
The signing in Tokyo for the deal, largely reached late last year, is ceremonial. It was delayed from earlier this month because Japanese Prime Minister Shinzo Abe canceled going to Brussels over a disaster in southwestern Japan, caused by extremely heavy rainfall. More than 200 people died from flooding and landslides.
European Council President Donald Tusk and European Commission President Jean-Claude Juncker, who arrived Monday, will also attend a gala dinner at the prime minister’s official residence.
Both sides are heralding the deal, which covers a third of the global economy and more than 600 million people.
The deal eliminates about 99 percent of the tariffs on Japanese goods to the EU, but remaining at around 94 percent for European imports into Japan for now and rising to 99 percent over the years. The difference is due to exceptions such as rice, a product that’s culturally and politically sensitive and has been protected for decades in Japan.
The major step toward liberalizing trade was discussed in talks since 2013 but is striking in the timing of the signing, as China and the US are embroiled in trade conflicts.
The US is proposing 10 percent tariffs on a $200 billion list of Chinese goods. That follows an earlier move by Washington to impose 25 percent tariffs on $34 billion of Chinese goods. Beijing has responded by imposing identical penalties on a similar amount of American imports.
Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal. The partnership includes Australia, Mexico, Vietnam and other nations, although the US has withdrawn.
Japan praised the deal with the EU as coming from Abe’s “Abenomics” policies, designed to wrest the economy out of stagnation despite a shrinking population and cautious spending. Japan’s growth continues to be heavily dependent on exports.
By strengthening ties with the EU, Japan hopes to vitalize mutual direct investment, fight other global trends toward protectionism and enhance the stature of Japanese brands, the foreign ministry said in a statement.
The EU said the trade liberalization will lead to the region’s export growth in chemicals, clothing, cosmetics and beer to Japan, leading to job security for Europe. Japanese will get cheaper cheese, such as Parmesan, gouda and cheddar, as well as chocolate and biscuits.
Japanese consumers have historically coveted European products, and a drop in prices is likely to boost spending.