China urges US to stop curbs on ZTE

Updated: 2016-03-08 14:03


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China is urging the United States to reconsider placing curbs on ZTE Corp that reportedly would stop the country's second-largest telecommunications equipment maker from buying software and parts from US suppliers.

"We hope the US side can stop the wrong decision to prevent harming our trade cooperation and the bilateral relations," Foreign Ministry spokesman Hong Lei said in Beijing on Monday.

His comments were made at a daily news briefing following a Reuters report on Sunday that the Commerce Department would place the restrictions on ZTE on Tuesday.

The restrictions also would apply to three other entities over an alleged violation of US exports controls on Iran,Reuters said.

There was no comment from the Commerce Department.

Trading in ZTE was halted in Hong Kong and Shenzhen on Monday.ZTE said in a statement that the company "has been working with associated US government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns."

While ZTE can appeal the Commerce Department action, suppliers to the company will have to apply for licenses that will generally be denied, Reuters reported. IBM, MicroSoft and Qualcomm are among US-based companies that are or have supplied technology to ZTE.

David Reid, a professor at the Albers School of Business and Economics at Seattle University, said that "ZTE is such a big player it is likely this action by the US has been cleared at the highest political level in Washington".

Reid said that this latest technology-related dispute comes amid tensions between the US and China over cyber security, trade and events in the South China Sea.

He said all of these matters "help bring policy decisions, like this ZTE matter, into sharp relief and may influence decision-making".

Reid said that the US has to show due diligence in ensuring that agreements are being kept – similar to the way the ministries of Commerce and Finance and the National Development and Reform Commission (NDRC) monitor actions of foreign companies in China.

The Wall Street Journal reported that the restrictions may affect ZTE's smart-phone business where it holds a 7 percent share of the US market according to research concern IDC. Some ZTE phones rely on products from American firms like Intel Corp and Qualcomm Inc, the Journal said.

"This may cause significant supply problems to both ZTE's equipment and handset businesses," wrote Jefferies analyst Cynthia Meng in a research note, according to the newspaper.