At 15:00 in the afternoon, ZTE held a press conference in Shenzhen headquarters to respond to the US ban. The press conference was only 10 minutes. Chairman Yin Yimin said that the US ban may cause ZTE to enter a state of shock, to all employees of the company and to operators around the world. Customers, end-consumers and shareholders' interests have caused direct damage. We firmly oppose it.
Yin Yimin clearly stated that he opposes the politicization of trade. He said that he will increase investment in R&D, and he believes that asking for help is not as good as asking for help, and that it is against the unilateralism of certain countries that undermines the global industrial chain.
At the end of the press conference, Yin Yimin insisted: "All ZTE products have a population of 1.3 billion people in the domestic and global markets. We have the ability and are determined to tide over the difficulties. We will never give up." ZTE announced the Sino-U.S. relations Turning point?
Author: Chen Jianguang, chief economist at Mizuho Securities Asia, the paper does not represent the views knowledge position and does not constitute investment advice.
On April 16, the United States banned its domestic companies from selling components to ZTE within seven years. The news, such as ground-thundering thunder, increased the possibility of Sino-U.S. trade frictions extending into the science and technology war. The recent Sino-U.S. trade battles have been fluctuating. Since China announced a new round of opening up measures at the Boao Forum for Asia, including opening up financial markets, improving the investment environment, focusing on intellectual property rights, and promising to increase imports, the trade war between China and the United States appears to have slowed down. However, at this time, the United States It also opened up a new battlefield in the high-tech field. What does it mean? How should China respond? Has there been a turning point in Sino-U.S. relations?
01 Two U.S. U.S. Government Sanctions
The ban was introduced because ZTE violated an agreement reached with the U.S. government after it was found to have illegally sold the goods to Iran. In March 2016, the U.S. Department of Commerce determined that ZTE was suspected of violating U.S. export control policy against Iran and proposed to implement ZTE’s Export restrictions.
Afterwards, ZTE actively worked with the US to negotiate. The U.S. government announced that it "temporarily" suspended the sanctions against ZTE and granted ZTE a temporary export license for three months. On March 7, 2017, ZTE finally announced a settlement with the United States. The main exchange condition is to pay up to 890 million U.S. dollars in criminal and civil penalties, while promising to expel four senior employees and impose disciplinary penalties on bonuses or criticism.
The resignation of the Obama administration made ZTE quickly out of the shadow of the United States fine. In 2016, the stock price of Zhongxing Hong Kong fell by 30%, and then began to rebound. By the time of reaching the settlement in 2017, it has recovered all the decline. ZTE Corporation after the crisis ended in 2017 With remarkable achievements, net profit increased by 294% year-on-year in 2017, and the Hong Kong stock price rose by 117% in 2017.
In contrast, it is not hard to find that the punishment of the Trump administration is obviously a fuss. The reason is that although ZTE has dismissed four senior employees, it did not impose disciplinary punishment on another 35. This is a disappointing reason. The punishment is too heavy, and it is also a matter of sin. If the policy is dropped, ZTE will bring in no parts to buy, and there will be no technical support in the desperate situation.
In the author's view, the apparent contrast between the attitudes of the two governments toward Chinese companies reflects a profound change in their relations. In any case, compared to the Trump administration, the Obama administration’s attitude towards China has become increasingly tough, but after all it was against ZTE Corporation. The choice of ease of sanctions is based on the overall cooperation between China and the United States in economic and trade relations. There are me among you, and I have your choices from the big background. The Trump administration is holding on to the slightest loopholes. Even in the case of serious damage to the interests of their own companies, they have no mercy, indicating the escalation of tense economic and trade relations between the two countries.
02 From the 'Fabba' incident, does the United States see double standards?
The U.S. sanctioned sticks repeatedly waved. In violation of US sanctions against foreign sanctions, ZTE was by no means the first company to be punished. The U.S. has also severely punished its allies. It also attracted worldwide attention and controversy in 2014. , United States sanctions against BNP Paribas.
At that time, BNP Paribas had been accused of using the U.S. financial system to transfer funds from Sudan to Iran and Cuba from 2004 to 2012, and had pleaded guilty to criminal offences and reached a settlement with the U.S. federal and state governments, agreeing to pay a fine of US$8.97 billion. More unprecedented is that in 2015 Fife was banned from doing business in U.S. dollar settlement through New York and other U.S. subsidiaries for a period of one year.
At that time, the French government exerted every effort. The president of the French Central Bank, finance ministers, foreign ministers, and even the president personally came forward and asked the United States not to overly punish BNP Paribas. However, it failed to reverse the fine of up to 9 billion U.S. dollars. The fine not only allowed France to The bank has barely covered (BNP Paribas's pre-tax profit for 2013 was approximately 8.2 billion euros, or approximately 11.2 billion U.S. dollars), and the establishment of a European-funded bank has so far been fined for violating the U.S. Department of the Treasury’s Overseas Assets Control Office sanctions. The highest record.
Compared with the 'Faba' incident and the punishment of ZTE in the Obama era in 2016, the author believes that the U.S. approach to handling this time is obviously different. The former two are all based on high fines as the main sanction. The U.S. sanction is more focused. Export restrictions and technical blockades are even very decisive. They directly hold onto the throat of the business. Considering that ZTE is a typical representative of China’s state-owned high-tech companies, in contrast, it further explains its motives for curbing the rise of high-tech companies in China.
03 Ye Zhiqiu's ZTE sanctions reflect the changing situation of Sino-U.S. relations
Comparing the obvious changes in the attitudes of the two governments, comparing the different companies and the clearly different sanctions before and after the same company, the ZTE phenomenon is obviously difficult to make a simple interpretation. It reflects the escalation of tension between China and the United States.
In fact, that is, in 2015, the author noticed the obvious change in Sino-U.S. diplomacy’s “abnormal state” and expected that along with the significant increase in China’s overall strength, Sino-U.S. future will not only be seen in the traditional security field, In the economic areas where the interests of China and the United States converge, the friction between the two countries will continue to rise.
However, during the Trump period, the escalation of the tense situation in Sino-U.S. relations really exceeded the author's expectations. In the author's view, the Sino-U.S. game has obvious differences due to short-term, medium-term, and long-term.
That is, in the short term, trade disputes are used as an important weapon. This is Trump's commitment to honor election campaigns and seek to consolidate political resources.
From a medium-term perspective, globalization has led to a gradual decline in the proportion of U.S. manufacturing and the corresponding loss of employment, while Chinese manufacturing has leapt to the top in the world. Therefore, to curb the rise of Chinese manufacturing is Trump’s great appeal to the United States once again.
In the long run, beyond the economic sphere, the United States may set off a comprehensive countermeasure against China, irrespective of Trump, or even whoever assumes the role of President of the United States. Tensions will be felt. continue.
Judging from the current situation, the trade war has expanded to the technological warfare or a turning point in the overall upgrade of the game between the two countries. After the 2018 US Defense Strategy Report publicly positioned China as a strategic competitor to the United States, not only in the trade field, but also in the United States. Sci-tech enterprises have made big shots. The sword refers to 'Made in China 2025' and the Chinese hawks are fully qualified. Their attitude toward China’s strong position has been fully upgraded.
04 Correspondence of China
In the author's opinion, the United States has undergone profound changes in its attitude toward China, especially the selection of a relatively high-tech industry that has an advantage over the United States. It stems from the fact that it has seen the rapid development and potential threats to China in the past decade.
It can be seen that in the high-tech fields such as artificial intelligence, cloud technology, and the Internet of Things, China has emerged as a new force. In just a few years, it has overpowered traditional technology powers such as Germany and Japan. It is almost equal to the United States.
For example, in the field of artificial intelligence, the analysis agency CB Insights released the artificial intelligence trend report for 2017. In 2017, China’s artificial intelligence-related companies’ financing amount exceeded that of the United States, ranking first in the world for the first time (Chinese enterprises accounted for 48%, exceeding US’s 38%). In addition, in terms of popularization of high-tech achievements, China even partially surpassed the United States. According to Ipsos survey results, as of 2016, China’s mobile payment penetration rate ranks first in the world with 77%, and the penetration rate in the United States and Germany is 48%. Japan's penetration rate is only 27%.
Therefore, in regard to the ZTE sanctions, the author believes that it should be given enough attention to see it as an early warning of a major shift in Sino-U.S. relations. Only in terms of the incident itself, there are the following evolutions: First, from the enterprise level, actively participate in Good communication and communication; Second, through the acquisition and merger at the enterprise level, the main business and industrial chain of ZTE will be transferred to other companies; Third, coordination at the national level.
While recognizing the profound nature of the problem, strategically speaking, it is necessary to do a good job of policy preparation. From the author's point of view, due to the unpredictable nature of Trump's policies, it is necessary to take measures to deal with it. In order to prevent it from becoming aggressive, it is necessary to give appropriate counterattacks to promote peace by war. From China's own point of view, the more deterrence it becomes, the more important it is to demonstrate that high-tech development itself is crucial and that it is more firmly promoted. A new round of reform and opening up, the implementation of the strategy of rejuvenating the country through science and technology and the “Made in China 2025” strategy, encourage innovation, protect property rights, increase the strength of domestic scientific research, and transform the core intellectual property and technology held by foreign companies into their own technologies. It is still a way to deal with it.
In addition, on the one hand, the emphasis on economic and trade cooperation with the United States is a stabilizer and ballast for Sino-U.S. relations, and it responds to the reserve; on the other hand, it strengthens cooperation with high-tech countries such as Europe and Japan, and continues to strengthen its marketization and internationalization. It is also a very pragmatic policy choice to strive for a broad alliance.