Sunday, 22 September 2019

ZTE has few cards left to play to avoid ‘death penalty’

NEW YORK: It’s not every day you see a company that employs 75,000 and once had a market cap of $20 billion facing instant doom on an hour-by-hour basis.

But that’s the situation that Chinese telecom firm ZTE finds itself in right now. Following revelations that the company sold equipment with U.S. technology to Iran and North Korea in violation of U.S. sanctions, President Trump decided to kill the company. Then he decided not to kill it. Now, this week, Congress is deciding whether to kill it or not, much to the chagrin of the White House, who thought the matter closed. Senators like Tom Cotton (R-AK) this week have said they believe that the “Death penalty is right penalty for ZTE’s behavior.”

Before we go further, let’s step back for a moment and just muse about what is happening here. Congress and the White House are politicking back and forth over the fate of one of China’s crown jewel tech companies, with tens of billions of dollars and tens of thousands of jobs at stake. If that isn’t the definition of hegemonic power, I don’t know what is. And remember that both branches of government are run nominally by the same party.

China has been leveraging its long-awaited approval of Qualcomm’s acquisition of NXP Semiconductors to push the Trump administration to concede to ZTE’s survival. The Trump administration has gotten that message loudly and clearly, which is among many reasons why it ended up selecting a $1 billion fine as the penalty and trying to move on.

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