International

A Tale Of Two China (Tech Firm) Policies?

china-usa-global-relations

When a big firm shuts down, it’s not every day that a sitting president lobbies to get it un-shut. Nor is it often the case that the firm is a Chinese tech juggernaut, smack dab in the middle of a crossfire between China and the U.S., jousting over intellectual property, economic competition and several hot button issues that exist between the two countries.

But yet that is what seems to be transpiring as President Donald Trump said via Twitter that he and President Xi Jinping of China are “working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done.”

This missive from Trump, launched Sunday, comes in the wake of ZTE’s decision to stop its “major operating activities” – a decision that itself comes in the wake of the Trump administration’s order of a seven-year ban on U.S exports to the company.

The ban was levied on the news that ZTE had been sending equipment like routers and servers with U.S.-sourced components to both Iran and North Korea, actions that violate U.S. export laws. In addition, ZTE agreed last year to pay almost $900 million in fines, among other penalties.

The Trump administration slapped the seven-year ban on the company after determining that ZTE did not comply with all the tenets of its agreements.

The impact of the sudden reversal, as it seems to be, would be significant for ZTE, which is the second-largest smartphone maker in China and has been among the top five players in the United States – and which relies on both Qualcomm chips and the Android operating system.

Behind Trump’s promise to get ZTE on surer footing, obvious politics are at work. As China remains a huge market for exports, China and the United States are in the midst of a back-and-forth with trade barriers, with everything from fruit to wine to tech steel to aluminum on – or possibly off – the table. Beyond that, the Trump administration may want some leverage, via China, to help with the summit scheduled between Trump and North Korea’s Kim Jong Un next month.

In international relations, policy, politics and business can combine in combustible ways. The Trump tweet has led to concern from at least some corners of Capitol Hill. Said Republican Senator Marc Rubio via Twitter and quoted by Reuters: “I hope this isn’t the beginning of backing down to China.”

The Sunday tweet may also belie some reversal of how the current administration views this company, or perhaps China.

The actions seemed to be incongruous with recent events, where national security seemed to, well, trump what might happen in China’s own economy.

At the dawn of this year, Trump’s administration said no to the $1.2 billion deal where Ant Financial, an Alibaba affiliate, would have stretched across the border, so to speak, to buy the U.S. firm MoneyGram International. The threat seemed to reside with data tied to millions of accounts that might have been, or were perceived to be, easy targets for Chinese interests. And here in ZTE was a firm bringing U.S. components to key U.S. adversaries.

But then again, when Trump was in the earliest days of assuming power, he met with Alibaba’s Jack Ma and said they’d go on to do “great” things, with the idea that one million U.S. firms would be able to reach the Chinese consumer. Then came the scuttling of the MoneyGram deal.

Not long ago, “national security” may have been the rallying cry against cross-border deal making (read: acquisitions.) But now, there is cross-border deal making of a different sort. Against a backdrop where China exports about $500 billion to the U.S. annually, and where ZTE employs tens of thousands of individuals in China (hence the lost jobs that Trump decried in his Sunday tweet), some companies are perhaps more equal than others. So what’s the pattern here? It’s possible that there is no pattern.

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out our April 2019 Unattended Retail Report. 

TRENDING RIGHT NOW

To Top