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U.S. to punish Chinese telecoms giant over alleged Iran violations U.S. to punish Chinese telecom giant over alleged Iran violations
(about 7 hours later)
BEIJING — The United States will place export restrictions on Chinese telecoms giant ZTE for allegedly selling U.S. technology to Iran, Reuters has reported, causing trading in the company’s shares to be suspended in Hong Kong Monday. BEIJING — The United States will place export restrictions on Chinese telecom giant ZTE for allegedly selling U.S. technology to Iran, Reuters has reported, prompting an angry response from the Chinese government and causing trading in the company’s shares to be suspended in Hong Kong on Monday.
The move, due to take effect Tuesday, may also further strain relations between Washington and Beijing in the information technology (IT) sphere, and could cause China to retaliate against U.S. companies, experts said. The move, due to take effect Tuesday, is likely to further strain relations between Washington and Beijing in the information technology sphere and could cause China to retaliate against U.S. companies, experts said.
The Commerce Department has been investigating ZTE since 2012 after Reuters reported it had signed contracts to ship millions of dollars of hardware and software from leading U.S. tech companies to Iran’s largest telecoms carrier, Telecommunication Co of Iran, and an associated firm. The Commerce Department has been investigating ZTE since 2012 after Reuters reported that the company had signed contracts to ship millions of dollars of hardware and software from leading U.S. tech firms to Iran’s largest telecoms carrier, the Telecommunication Co. of Iran, and an associated firm.
Now, ZTE’s suppliers – anywhere in the world — will need to apply for an export license before selling U.S. equipment or parts to China’s largest telecoms equipment company. If they don’t, they could face punishment. Now, ZTE’s suppliers — anywhere in the world — will need to apply for an export license before selling U.S. equipment or parts to China’s largest telecom equipment company. If they don’t, they could face punishment.
“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.
Samm Sacks, senior Asia analyst at the Eurasia Group, said the decision was a blow to Beijing’s ambitions to make Chinese companies global leaders in next generation IT, putting a “red flag” on the company at a time when it is the fourth-largest provider of smart phones to the U.S. market, and expanding in Europe. China’s Foreign Ministry protested.
In 2012, ZTE responded to the initial Reuters report by announcing it would “curtail” its business with Iran, not seek new customers and limit business with existing customers. “The Chinese side is firmly opposed to the United States using domestic laws to place sanctions on Chinese companies,” spokesman Hong Lei said Monday a regular news conference. “The Chinese side urges the U.S. side to call off the wrong action lest it should jeopardize economic cooperation and relationship between China and the United States.”
The company issued a statement late on Sunday saying it was “highly concerned” about the latest reports, insisting it had been cooperating with the U.S. investigation since 2012 “and is committed to fully address and resolve any concerns.” Samm Sacks, senior Asia analyst at the Eurasia Group, said the decision was a blow to Beijing’s ambitions to make Chinese companies global leaders in next-generation IT, putting a “red flag” on the company at a time when it is the fourth-largest provider of smartphones to the U.S. market and expanding in Europe.
In 2012, ZTE responded to the initial Reuters report by announcing that it would “curtail” its business with Iran, not seek new customers and limit business with existing customers.
The company issued a statement late Sunday saying it was “highly concerned” about the latest reports, insisting that it had been cooperating with the U.S. investigation since 2012 “and is committed to fully address and resolve any concerns.”
[U.S. firm alleges China's government colluded with ZTE][U.S. firm alleges China's government colluded with ZTE]
Sacks said the move signals the Obama administration was not willing to back down over long-standing concerns over the issue, even at the expense of friction in the bilateral relationship with China. Sacks said the move signals that the Obama administration was not willing to back down over long-standing concerns about the issue, even at the expense of friction in the relationship with China.
Beijing is unlikely to react immediately, she argued, with officials focused on ensuring a smooth visit by President Xi Jinping for next month’s Nuclear Security Summit in Washington. Beijing is unlikely to retaliate immediately, she argued, with officials focused on ensuring a smooth visit by President Xi Jinping for next month’s Nuclear Security Summit in Washington.
But in the medium-term, it is likely to retaliate by tightening market access or regulatory control over U.S. companies in China. But in the medium term, it is likely to counter by tightening market access or regulatory control over U.S. companies in China.
It has been an already tough couple of years for U.S. IT companies in China: They have faced significant government mistrust in the aftermath of Edward Snowden’s revelations about a massive U.S. cyber-espionage program, and there was also anger here after the U.S. government accused China of commercial cyber-espionage. It has been an already tough couple of years for U.S. IT companies in China: They have faced significant government mistrust in the aftermath of Edward Snowden’s revelations about a massive U.S. cyber-espionage program, and there was anger here after the U.S. government accused China of commercial cyber-espionage.
Companies like Cisco and Apple were removed from some government procurement lists last year. Companies such as Cisco and Apple were removed from some government procurement lists last year.
The American Chamber of Commerce in China reported in January that 83 percent of high-tech and R&D-intensive industries feel less welcome here than in prior years The American Chamber of Commerce in China reported in January that 83 percent of high-tech and R&D-intensive industries feel less welcome here than in prior years.
“Our IT members continue to operate in an increasingly challenging and frustrating environment that limits their market opportunities,” AmCham China president James Zimmerman said in an emailed statement. “Our IT members continue to operate in an increasingly challenging and frustrating environment that limits their market opportunities,” AmCham China President James Zimmerman said in an emailed statement.
“We promote fair and market-based innovation, as innovation can’t happen in a bubble. However, over the past year or more, we’ve seen several policies and draft laws that we fear would exclude foreign companies, to the detriment of China and domestic companies.”“We promote fair and market-based innovation, as innovation can’t happen in a bubble. However, over the past year or more, we’ve seen several policies and draft laws that we fear would exclude foreign companies, to the detriment of China and domestic companies.”
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