Opinion: Caution as 'trade terrorist' coming to town

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Editor’s note: This article is translated from an editorial piece originally published in the Wechat official account of Bullpiano.

It seems that the suspense around America’s ban on ZTE has finally reached a climax: according to Reuters, the Trump administration has informed lawmakers that a deal with ZTE has been reached and it has decided to revive its business with the US.

In exchange for lifting the ban, ZTE would have to accept “high level security guarantees, change of management and board” and a 1.3-billion-US dollar fine.

It was a bitter pill for ZTE to swallow and valuable lessons that all Chinese enterprises can be drawn from the ZTE storm.

Never leave things to chance

Honoring contractual obligations is of vital importance to Chinese firms when they are participating in international competition. With the China-as-threat theory spreading, some politicians in the West have been trying to find defects in Chinese firms when they do business in their countries.

A cell phone manufactured by ZTE, China's No.2 smartphone maker, is seen on a store shelf in Miami, Florida, May 14, 2018. /VCG Photo

Chinese firms should be cautious in policy-making processes if they want to compete in foreign markets.

Let's look at the ZTE issue specifically. ZTE's biggest mistake is that they knew that their actions violated the laws of the United States, but they left things to chance. ZTE signed a contract with the US that stated it will not sell products to Iran. ZTE violated this clause in pursuit of economic interests.

ZTE thought that the United States would not notice it, but their every move was known to the US government. This gave the US government a legitimate reason to sanction ZTE.

The ZTE lesson was a warning to other Chinese hi-tech firms that they must abide by local laws when doing business in other countries and must not leave things to chance.

Prepare for a rule-breaking US

The second thing is that we have to be prepared for a more unpredictable America that dares to challenge any existing trade rules.

It is true that ZTE made a serious mistake, but it was not enough of a mistake to be “sentenced to death.” The fact that the US has decided to strike ZTE in such a harsh way means that the US has turned from being “unreasonable” to a “trade-terrorist.” In order to achieve short-term advantages, the US is willing to break any trade rules.

After imposing steel and aluminum tariffs, Trump has decided to launch a national security investigation into automotive imports. This does not concern China as much as America’s long-time allies in Europe, Japan and South Korea, as the US mainly import cars from these regions and countries.

How car imports can be an issue of “national security” is beyond many people’s understanding.

Core technologies

Even though ZTE is a global enterprise with strong technical strength it would not survive a US ban. The reason is simple enough: all the chips ZTE needs are imported from the US.

ZTE research institute , located in Tianjin Binhai New Area /VCG Photo

ZTE has escaped this one due to China’s continuing efforts in negotiating with the US. But it has caused China to take a hard look at its technology development sector.

China has made remarkable achievements over the past few decades. But it is still behind the US in some hi-tech areas. In 2009, former US president Barack Obama borrowed a concept from the Bible to explain his economic vision: house upon a rock.

At the end of the Sermon on the Mount, there is a story of two men building their houses. The first man built his on a pile of sand that was destroyed by a storm; while the second man was wiser and as “the rain descended, and the floods came, and the winds blew, and beat upon that house, it fell not: for it was founded upon a rock.”

It could also be the same for the Chinese economy and its enterprises: a house built on another country’s rock, as grand as it may be, cannot survive a storm or flood. Core technologies are indispensable to China’s long-term development and, in this regard, China may even have to be thankful to Trump for reminding of them.