China’s ZTE proposes $10.7 billion credit proposal, new board

Chinese telecommunications giant ZTE last week agreed to pay a $1 billion fine to the US government. (Reuters)
Updated 14 June 2018
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China’s ZTE proposes $10.7 billion credit proposal, new board

HONG KONG: Chinese telecommunications giant ZTE Corp. has proposed a $10.7 billion financing plan and nominated eight board members in a drastic management overhaul, as it seeks to rebuild a business crippled by a US supplier ban.
The news, announced late on Wednesday, indicates China’s No.2 telecom equipment maker is working toward meeting the conditions laid out by the US so it could resume business with American suppliers, who provide about 25-30 percent of the components used in ZTE’s equipment.
Investors cheered the development, driving up ZTE’s Hong Kong-listed shares as much as 3.7 percent on Thursday morning, outperforming the Hang Seng Index that dipped slightly.
A day earlier, its shares plunged a record 41 percent in Hong Kong and 10 percent in Shenzhen, wiping out almost $3 billion off embattled ZTE’s market value, as it resumed trading after being suspended for almost two-months due to the US ban.
The US imposed the seven-year supplier ban on ZTE in April after it broke an agreement to discipline executives who conspired to evade US sanctions on Iran and North Korea.
ZTE last week agreed to pay a $1 billion fine to the US government. The ban will, however, not be lifted until ZTE places another $400 million in an escrow account in a US-approved bank for 10 years.
ZTE was also ordered to radically overhaul its management and hire a US-appointed special compliance coordinator.
As part of the agreement, ZTE needs to replace its 14-person board and fire all members of its leadership at or above the senior vice president level, along with any executives or officers tied to the wrongdoing. The US commerce department can exercise discretion in granting exceptions.
In filings late on Wednesday, ZTE said its controlling shareholder, ZTE Holdings, had nominated 8 new board members.
This includes 5 non-independent directors — Li Zixue, Li Buqing, Gu Junying, Zhu Weimin, and Fang Rong — all from state-linked firms that are shareholders or investors of ZTE Holdings, which has a 30.34 percent stake in ZTE.
Cai Manli, Yuming Bao and Gordon Ng have been nominated as independent non-executive directors.
Voting on this will take place at an AGM on June 29.
ZTE also proposed to amend a company statute at the AGM to remove a clause that required the chairman to be elected from directors or members of the senior officers of the company who have served for three years or more.
In addition, ZTE proposed to allow the board to apply for a $10.7 billion credit line, including a 30 billion yuan ($4.69 billion) from Bank of China and $6 billion from China Development Bank.
ZTE’s Shenzhen-listed shares dropped by the maximum daily permitted limit of 10 percent on mainland exchanges for a second day on Thursday.


Infectious diseases are set to become as great a risk for global business as climate change

Updated 19 January 2019
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Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.