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Why The ZTE Case Is Causing Some In China To Think About Economic Relations With U.S.

May 14, 2018
Originally published on May 14, 2018 9:19 pm
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President Trump confused some people yesterday when he tweeted his intention to help rescue a top Chinese telecommunications firm. He tweeted that U.S. penalties against a company called ZTE have caused too many job losses - not American jobs, but Chinese jobs.

NPR's Anthony Kuhn reports from Beijing that ZTE's case is causing some soul-searching in China about its economic relations with the U.S.

ANTHONY KUHN, BYLINE: Not many people in the U.S. know ZTE, but it's one of the world's largest makers of telecom networks and cellphones. Last year, the U.S. Commerce Department accused ZTE of exporting its products to Iran and North Korea in violation of U.S. sanctions. ZTE paid over a billion dollars in fines.

This year, when the U.S. found ZTE had not fixed the problem, it banned the sale of U.S. tech products to ZTE for seven years. ZTE basically ground to a halt because it couldn't get the U.S. microchips it uses in its products. Trump's pledge to help ZTE has drawn fire at home, and not just because he promised to help save Chinese jobs instead of American ones.

SCOTT KENNEDY: The president's tweet doesn't feel good either because it's the president's intervention in what should be a strictly legal matter.

KUHN: That's Scott Kennedy, China expert at the Center for Strategic and International Studies in Washington D.C. He says that by going after ZTE, the U.S. has strengthened China's conviction that it's got to manufacture the high-tech products it needs so as not to be at the U.S.' mercy.

KENNEDY: By throwing the book and the kitchen sink and everything else at ZTE, the U.S. has sent a signal to China that techno-nationalism is the right way to go.

KUHN: That techno-nationalism is expressed in Made in China 2025, a policy aimed at controlling domestic markets for high-tech products, such as artificial intelligence and new energy vehicles. The U.S. sees this Chinese policy as a threat, and it's one of the key issues in the ongoing trade dispute with Beijing.

But the U.S. still needs China's cooperation on a range of issues, including North Korea. And Beijing-based economist Hu Xingdou says President Trump may be willing to ease up on ZTE in order to protect the overall economic relationship.

HU XINGDOU: (Speaking Chinese).

KUHN: "The U.S. still needs China," he says. "If the U.S. causes China's economy to collapse, it won't do the U.S. much good, and the U.S. will lose markets for its core technologies." Scott Kennedy doubts, though, that saving ZTE will do much to ease U.S.-China trade tensions.

KENNEDY: Some people are reading in this that this definitely means that the U.S. and China are going to reach a broader deal and a trade war won't commence. I'm not sure of that. I still think that train is heading in that direction.

KUHN: China's government today welcomed President Trump's offer to help ZTE. It comes as China's top economic official Liu He is due in Washington Tuesday for trade talks with U.S. officials. Anthony Kuhn, NPR News, Beijing.

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