The ZTE incident has seen a major turnaround, so why is businessman Trump willing to let it off the hook?
Author: CloudPalm Finance/Wang Xinrong
In the evening of May 13, President Donald Trump tweeted, "We are working together and will provide ZTE with a quick way to resume business. (The ZTE incident has caused) quite a few people in China to lose their jobs, and the U.S. Department of Commerce has been instructed to fix this properly." This tweet from Trump means that ZTE has officially turned the corner.
On April 16 this year, the U.S. Department of Commerce announced that it would prohibit U.S. firms from selling any electronic technology or communications components to Chinese telecom equipment maker ZTE, a ban that lasts up to seven years until March 13, 2025.
The industry was in an uproar when the ban was announced. ZTE's products and equipment include a large number of U.S. semiconductor chips, many of which are far from localization, "ban" directly hit China's second largest telecommunications equipment manufacturers, opened the Chinese semiconductor industry's pain points, the chip localization alternative process thus attracted much attention. China's science and technology industry in the ushered in a huge shock of colleagues, set off a wave of public opinion for the "lack of core" weaknesses of the main tide of public opinion.
At the same time, the U.S. and China are also closely involved in multi-party negotiations and mediation. After 27 days of turmoil, things finally took a turn for the worse.
But Trump suddenly tweeted a promise to help ZTE resume operations. What's in this gourd?
However the fact is that it's not just ZTE that's losing out from the sanctions. ZTE supplies 25-30 percent of its equipment with components from U.S. companies, from smartphones to communications network equipment. Reuters said Trump's attitude towards ZTE may have a major impact on the shares of U.S. optical parts makers such as AcaciaCommunications (ACIA.O) and Oclaro (OCLR.O); a ban on U.S. firms from exporting goods to ZTE has led to a setback in the shares of the aforementioned companies. This comes after Reuters reported on May 11 that a ZTE executive said on Friday (11) that the company paid more than $2.3 billion in 2017 to 211 U.S. exporters.
Some media outlets also said there was no more information for us to analyze Trump's motives. However, with China's Vice Premier Liu He set to lead talks with the U.S. on China-U.S. trade issues in Washington this week, the signals Trump is releasing will help both sides ease tensions and actually discuss the issues realistically around them instead of being distracted by nationalistic sentiments that obscure the issues.
In fact, international economists on both sides of the United States and China can easily reach a theoretical **** knowledge. For example, Nobel Prize-winning economist Stiglitz has argued that the U.S. trade deficit is mainly a problem with the U.S. macroeconomy, with insufficient savings within the U.S. leading to borrowing and spending, rather than a bilateral problem between the U.S. and China. And international trade theory experts have pointed out that sanctions against China will seriously hit the global industrial chain, not only affecting the stormy globalization, but also inevitably affect the welfare of U.S. consumers.
Trump is "fickle" but China's position is "consistent"
Trump's move is a vague signal to the U.S., as the previous clamor that "China and the U.S. are fighting a high-tech war", "China and the U.S. are fighting a high-tech war", "China and the U.S. are fighting a high-tech war", "China and the U.S. are fighting a high-tech war", "China and the U.S. are fighting a high-tech war" and "China and the U.S. are fighting a high-tech war". A high-tech war", "Trump suppression of China" and other rhetoric, and now issued to let the Chinese maintain employment, as if not the same Trump said.
But this is also enough to remind many people on the Chinese side: I am afraid that the current United States is not the same thing as the United States we knew before. We must revolutionize the cognition, can no longer carve a boat to seek a sword, the original formation of the understanding of the United States of America's political and economic operation of the simple application to the Trump administration, but to go back to the original point of in-depth study of the basis of Trump's administration and the entanglement of internal affairs.
In early April, the U.S. issued sanctions against ZTE set off a trend in China to study the U.S.-China trade friction - despite the fact that the trade friction is still only in the verbal stage. Various views have come and gone, and a little combing reveals that Chinese experts in particular cannot agree on Trump's intentions. Some see it as motivated by November's midterm elections, some see it as a high-tech war, and some see it as the eve of a new Cold War.
This shows that there is still a lack of convincing frameworks and principles for analyzing the intentions of Trump's approach. It is therefore important to "listen to what he says and watch what he does".
We undoubtedly welcome Trump's positive signal to China. At the very least, the U.S. correctly recognizes that in an interdependent world, there is a limit to what unilateralism can achieve. The U.S. side's consideration to address the trade imbalance and safeguard U.S. national security is understandable, but this must be based on full consultation with the Chinese side.
We will also pay close attention to the follow-up of this Trump proposal. Regardless of how the United States under Trump views globalization, China's position has been consistent and firm, that is, to continue to expand its opening up and walk the path of peaceful development together with the rest of the world.
What's next for ZTE?
China Merchants Communications analysts Wang Lin, Yu Jun for the "ZTE incident" of the subsequent trend to make a prediction:
ZTE by the U.S. Department of Commerce embargo on the second incident started on April 16, so far just full of January, the U.S. attitude from the firm denial of negotiation room, to the attitude change to accept the ZTE complaint materials, and then to Trump's proactive tweets. To today Trump took the initiative to send tweets to show the attitude of cooperation, the overall situation is developing in a positive direction.
We judge that the U.S. Department of Commerce is more likely to resume ZTE's purchases in the U.S. in the form of a moratorium on injunctions, and the final solution has yet to be determined, with fines becoming the most likely option.
From the perspective of the national game, the right to speak of 5G standards and intellectual property rights may become the focus of negotiations, and the further impact is yet to be assessed.
As for the market impact, analysts are highly consistent, emphasizing the focus on 5G expectations, as well as alternative logic and independent technology patents of the stock subject.
Anxin Securities said, "We continue to be firmly bullish on China's 5G":
In fact, in the week when the U.S. restarted ZTE's injunction, the three major carriers are still pushing forward with 5G as scheduled: Unicom is piloting 5G in 16 cities, Telecom is piloting 5G in 12 cities, and Mobile is piloting 5G in 5 cities + 12 cities 5G business application demonstration.
By the ZTE incident, the market may worry about the United States to further expand the crackdown on China's communications industry chain, or worry about China's counterattacks on U.S. companies, affected by this, the intermediate Xutron, halo new network and other stock price fluctuations, we recommend focusing on.
At the same time, the ZTE incident is a wake-up call for our communications industry chain, the localization of core devices to replace the urgent need to be put on the agenda, it is recommended to focus on the logic of substitution and independent technology patents of the standard, such as the birth of science and technology, Fei Rongda.
China-Taiwan Communications Internet team believes that it is necessary to focus on the expected recovery of 5G, as well as by the U.S. and China's impact on the subject. However, they also emphasized that this does not change the medium and long term logic of independent control and domestic substitution:
Focus on the 5G expected recovery and the U.S.-China impacted markers. The U.S. and China gaming events have reduced the market's expectations for the development of 5G, we believe that China's determination to develop 5G has not been affected. Focus on the previous affected at a low level of optical technology, Fiberhome Communications, the intermediate Xu Chuang, ZTE, and so on, as well as by the U.S.-China relations affected by the halo new network, the market concerns about the impact of the core chip imports of the Star Network Ruijie, ZiGuang shares, etc.;
Emphasis on the independent and domestically produced substitution is a certainty of the medium and long term logic, the U.S.-China game reminded of the reality of the domestic chip industry. Events let us clearly realize where the weakness of the domestic industry. The turnaround of the event does not change the independent control and domestic substitution of medium and long-term logic, the need for national strategy will be more pragmatic. It is recommended to continue to pay attention to the relevant standard.