With new restrictions on exports to China’s ZTE by U.S. companies set to go into effect tomorrow, the Chinese government is expressing their anger at the move by the Commerce Department. A spokesman for the Chinese Foreign Ministry stated, “China is opposed to the U.S. citing domestic laws to place sanctions on Chinese enterprises.”
The move by the U.S. government was taken in response to the discovery that ZTE was planning to use some shell companies to funnel U.S. technology to Iran. Current U.S. law restricts the export of certain controlled items to Iran. ZTE was planning to purchase these items and then turnaround and sell them to parties in Iran, effectively getting around the U.S. restrictions. The U.S. government sees this as ZTE trying to create a loophole in U.S. trade policy. Based on the Chinese government’s reaction, that country sees this move as the U.S. meddling in the operations of Chinese companies.
The stock markets in Hong Kong and Shenzhen also responded by halting trading in ZTE. This was done during the day instead of waiting for the markets to close. In the U.S., thinly traded ZTE saw shares trading slightly higher.
ZTE does have the option of appealing the Commerce Department’s decision, but the company has not yet issued a statement as to what their plans are.