On April 16, the Commerce Department denied export privileges to the Chinese phone and telecoms giant ZTE for seven years. This ban means that ZTE will no longer be able to buy technology from American suppliers, including chips and other critical components central to its products.
The ban didn’t get much attention outside the specialist business press in the United States. In China, it is being treated as a political and economic earthquake — and one that may have dramatic aftershocks. For years, the United States complained that China’s economic policy is driven by nationalism and the desire to protect native companies. Now, Chinese political debate depicts U.S. regulators as an existential threat. The Chinese government is marshaling a national strategy to make companies like ZTE less dependent on foreign suppliers.
This punishment is an existential threat to ZTE
The U.S. announcement was the result of a dispute over U.S. export controls. ZTE pleaded guilty last year to having broken U.S. rules by exporting equipment with U.S. components to Iran. The company was fined $900 million, given a suspended seven-year ban and $300 million fine, and required to comply with several requirements, including dismissing four senior employees and taking action against others. The U.S. government now says that ZTE repeatedly misled it before and after the settlement, prompting the ban. This action also comes in the context of renewed economic tensions between the United States and China, and the stated intention of the Trump administration to punish Chinese firms for taking advantage of the United States. ZTE has said that the ban is “extremely unfair” and has suggested that it intends to take legal action.
Read the full piece at The Washington Post.