Yes they were guilty, no normally that would not result in a sanction of this kind, they'd be fined and life would most likely go on the way it it did before.
Is it entirely a coincidence? Who knows. The Obama DOJ saw fit to fine ZTE 1.2 billion as part of the plea deal. So the conduct was serious. That makes it hard to argue that the punishment for violating the plea deal is some new thing Trump concocted to fuel a trade war.
this presupposes that punishments fit crimes for corporations in our country, and that there isn't rampant partiality
See the separate events in the last decade or so with major players getting minuscule punishments: Goldman Sachs et al, BOA, HSBC, Wells Fargo, etc etc
Maybe they'll decide not to pay and withdraw from the US completely, but that would seriously complicate any future re-entry once the current sourcing bans expire.
My guess is that they will switch to Chinese components and basically become a captive hardware manufacturer for the PRC government, which presumably won't let them fail completely even if their handsets are no longer market-competitive.
extracting a fine from a big foreign corporation is more like a good deal. Limiting the business of your country businesses - hardly so.
AFAIK: We don't know if they violated the plea deal; there is no due process; we only have the claims of an administration that is widely believed to lie. We can't distinguish a political decision from a legal one. (Please correct me if I'm wrong about the process.)
And it doesn't matter what the facts are, it's perception that counts. The appearance is that the current U.S. administration disregards process, fairness, honesty, and the rule of law; is an unreliable international partner; and particularly targets China. The ZTE penalty will be perceived in that context. Any leader must account for perception, whether they like it or not; I think we can fairly assume that the administration is aware of the essential nature of perception, is aware of the perception of this action, and has chosen it.
If I'm a European, I'll happily sell stuff to Iran if that means I'll make a profit. US sanctions do not apply to me.
Because they are a Chinese entity that buys U.S. made components in the U.S., and violated associated controls on the export of those components.
Btw, Taiwan, not China should be the point of focus, without Taiwanese semiconductor manufacturing capabilities a very large number of Western companies would suddenly be without product.
Yes and similarly without Western markets Taiwanese semiconductor will suddenly without a big paying customer. There is a "demand" and a supply, none of them exist on their own.
China (who doesn't respect IP) = 11T GDP
pretty sure China needs the developed world's customers more than they need China.
China can be replaced by automation and other developing countries for labor
> pretty sure China needs the developed world's customers more than they need China.
For now, yes.
> China can be replaced by automation and other developing countries for labor
We'll see. For now they seem to be doing pretty good, and in fact even if they replace their workers with automation they will do even better than they do today. Or do you believe that automation will magically bring back the production facilities?
their rate of growth is faked. have a look at their provinces confessing a 20-30% fake revenue
https://www.bloomberg.com/news/articles/2018-01-19/this-is-h...
> For now they seem to be doing pretty good
Their economy is saddled with debt, and their growth is slowing/stopping so much that Xi JingPing had no choice but to announce dictatorship way earlier (before riots and revolutions), their money is fleeing the country, their stock market crashed, they have demographics crisis, gender crisis, middle income trap crisis, the population's money are all stuck in real estate bubbles which are now deflating, their exports are down, their imports are up, their factories moving to other countries, etc.
I mean, the factories that production was offshored to (in China and more recently in SE Asia) were built largely in the last decade or two, by companies with fairly short ROI horizons.
There's no particular reason that new facilities couldn't be built in other locations in about the same amount of time. Intriguingly, China basically showed how quickly you can move a big chunk of global industrial production around from one place to another, and it's not that long. What global trade giveth, global trade can taketh away.
Modern factories are basically just big steel sheds built on concrete slabs, in which you house machinery and equipment that becomes obsolete over time. It would not be hard to build them elsewhere. My guess is that if you take labor costs away, the next critical factors are energy costs and transportation issues (both raw materials inbound and finished goods outbound). It could lead to some interesting manufacturing locations.
Other such factors are environmental regulations, tax breaks, shipping costs (which should always work out in favor of domestic production), cost of raw materials and energy (as you noted), access to those raw materials, knowledge, cost of land and other capex.
A high volume factory is nothing like a steel shed on concrete slabs, a factory is a building that is very much optimized for its function, and yes, it's not hard to build them elsewhere but once you have them they are hard to move.
A nice example is the semiconductor industry, which used to be a United States / Europe affair and then after a brief detour through Japan ended up mostly in Taiwan, China and South Korea.
The assumption that those advanced economies would want manufacturing back seems like nostalgia to me. Wouldn't that be going backward, to jobs of the mid-20th century with their income and quality of life? Those economies should be moving forward to better, more productive, safer, less physically difficult, higher paying jobs. Try working in a factory for awhile and you might appreciate your desk job with its ergonomic challenge of monitor height.
> If there's no labor advantage, offshoring production is a logistical nightmare.
Based on what I've read, labor plays only a small role. It's local expertise and its network effect, as with any geographical cluster for any industry. SV is an example: All the technical experts, the financiers, the schools ... even the real estate developers and local governments know what startups and IT giants need.
I don’t think many people will buy the idea that China is more “open for business” or that the government there can’t act capriciously.
America just reacts, I wished the rest of the world treated China as they threat others
Every country has to face the fact that because of the Internet we now live in a totally globalized world. Borders only exist on paper maps and globes and in the mind of governments. Those of us developing tech don't care about such things, we dont even see these kinds of barriers anymore. We just see good ideas, and smart people.
Care to elaborate? Which individuals? Sounds more like this was the culmination of an investigation by both the Commerce and Justice departments. And I'm fairly certain the sanctions themselves were imposed by the US Congress back in 2010.
Agreed, but the writing has been on the wall ever since the first set of Rubbermaid molds shipped to China (iirc on account of Walmart pushing them to lower their prices).
then they realized they had to give up 50% of company, their IP were stolen, the 1.4 billion customers never came because China's upper middle class income is $1000/month and half the population made $200/month, they had to give up board seats to Chinese officials, they gained some customers in China but lost most of their customers in NA, Europe and Japan because Chinese competitors sponsored by states stole them, they lost sales due to Alibaba, Amazon and Ebay shipped counterfeit products that was copied exactly like their own, directly to customers. And they died.
btw jacquesm did you go to the dark side of dictatorship? why are you openly supporting China?
I think you have reading comprehension issues if you feel that I'm supporting China.
It helps to actually try to understand something if you want to solve it. That's nothing to do with 'supporting China', but everything to do with analyzing how we got here and what will get us out. Hint: trade wars - either direct or by proxy - and protectionism are not going to get us out.
Japan used to be viewed in much the same way as China is today: cheap counterfeiter of Western designs. Korea ditto. And now, 30 years later they produce stuff on par with what the West was - not is - once capable of. China is also going that route but is substantially larger and far more ruthlessly managed. If we don't wise up and start playing this game a little smarter we will end up losing it in a big way.
I think US is playing the game pretty well. US is threatening to block their huge customer base from China, unless China plays fair, allows 100% ownership from foreigners and opens up their market and stop stealing IP, like they promised when they got into WTO. Via trade wars and protectionism. Not sure what else US can do besides completely stop trading with China.
And remember you're now dealing with a dictator. Dictators are irrational, stupid with economics, and lots of arrogance. They only respond to massive threat, which they did (thus saying they want to reduce tariff on cars)
From an outside perspective (Australia), it seems that the current US president matches this description as well. At this point it may be a good idea for at least one of the leaders involved in this trade war to step back and push for reasonable debate. Unfortunately I don't see either Xi Jinping or Donald Trump doing this, so I'm not sure if I'd agree with "US is playing the game pretty well".
If the US completely stops trading with China it won't be good for either party, and it would probably have negative carry-on effects to most of the global economy. We're in a state of economic brinkmanship, and we don't want to start an economic world-war.
And you're also dealing with Xi Jinping...
https://www.forbes.com/sites/wadeshepard/2017/11/05/how-the-...
India and South-East Asia countries have no love affair with China.
Africa is more and more disillusioned with China `investments`.
I'm all for leveling the playing field, but I'd hope it would be done with some intelligence rather than these knee jerk responses that actually achieve the opposite effect. Nobody forced United States and EU companies to relocate their manufacturing to the other side of the planet. If we want to be less reliant on the Chinese then it starts with no longer buying the cheapest crap possible.
IP games are the last resort of failed companies, maybe it will also be the last resort of countries that have lost all their other abilities.
I'm not saying it was ever good, but at a later stage, a lot improved. I believe mostly because of world wide media and things that leaked ( stealing resources,...), Which put a lot of pressure on the government
Since this is so well known once can only assume you have no idea what you are talking about. [1][2][3][4][5][6].
Congo is currently a global center of valuable minerals for western companies and has been plundered ruthlessly for 300 years by the west.
It's like pointing to the sorry state of Iraq, Libya or Syria 50 years on to insinuate some deficiency while forgetting to mention the complete destruction and devastation of these countries on brazenly false pretexts by western governments.
1. http://www.bbc.com/news/magazine-2439639
2. https://www.theguardian.com/world/2002/oct/22/congo.rorycarr...
3. https://www.wsws.org/en/articles/2002/10/cong-o26.html
4. https://www.thesiriusreport.com/geopolitics/silent-genocide-...
5. https://newint.org/features/2004/05/01/congo
6. https://www.aljazeera.com/indepth/features/2016/01/blood-min...
> I'm not saying it was ever good, but at a later stage, a lot improved. I believe mostly because of world wide media and things that leaked ( stealing resources,...), Which put a lot of pressure on the government
China is simply acting in their long term best interests, according to what they can get away with - adhering to trade agreements where they can without disadvantage, apologizing and promising to do better where they violate them. Meanwhile, half clueless American politicians fiddle while China takes an ever larger lead in critical areas of manufacturing and technology, adding to the manufacturing portfolio that is completely under their control.
Unlike so many others, you yourself can at least see what's happening ("Nobody forced United States and EU companies to relocate their manufacturing to the other side of the planet"), but with seemingly at least half of people under the impression that there is tariff parity between the US & China (who knows where they get such wrong ideas), that China is completely compliant on all agreements, and that any disagreement here is completely an issue of the POTUS being an uninformed child, how do you recommend serious policy makers approach this situation?
The United States assumed the role of world leadership from England based on a lot of luck (geographical isolation from WW2), from my vantage point China is well on it's way from doing the same to the US, but without even needing the benefit of a war, Western corporate leaders have done an amazing amount of work in industrializing China, and the young University educated American public is doing great work running interference for Chinese leaders, by suggesting any voices who dare mention the possibility that China is doing anything wrong are motivated by something equivalent to racism.
To me it seems like an utterly bizarre situation, I can hardly believe I am witnessing it. In my experience, I am a massive minority in these beliefs, but I've never been able to find someone to point to reasoning for why my thinking is wrong.
It's going to be a very interesting two decades ahead and it's always good to remind yourself that to live in interesting times is a curse, not a blessing.
No you're not, or you'd realize you're advocating a zero sum game
It's the same as advocating for more women and minorities in industry; white men lose. Some other side will lose, because our economy doesn't operate on "even playing fields."
It operates on "I have advantage and must protect it." The rich have an advantage of being rich and can sell some argument about knowing how to use their leverage to build companies to put people to work.
USA had "The rest of the world is a smoking crater." after WW2
China has "No one else has a manufacturing base for electronics like we do."
Advocating for a level playing field would be like universal healthcare, and not being forced trade away to the rich elite our creative endeavors for basic survival.
You're peddling disingenuous political correctness that ignores physical reality.
With lines like that I'm sure you'll make lots of friends here. /s
The world economy has profited handily from globalism at the same time that it has concentrated power and has made a very few people insanely rich.
If we want to get to a more sustainable model for the longer term then we will have to forego short term profits and our hunt for the cheapest priced items. It's an open problem on whether or not capitalism combined with democracies and the power of money in politics is sustainable or not. I'd bet against it, but time will tell.
And that's only if you are a completely selfish sociopath and care nothing for the welfare of others. If you are a healthy person who does care about others (which is a foundation of democracy - the belief that others should get a vote equal to your own), all the more reason for them to be free and prosperous too.
U.S. foreign policy has long supported the freedom and prosperity of others, in large part for that reason. (Yes, there are many exceptions to that policy; I'm just talking about economics. EDIT: And yes, there are many exceptions to the economic policy too.)
And open to steal your IP as they always have.
The only countries that have strong IP laws are the US and the EU and it works against us as much as it works for a small group of very wealthy countries and individuals. The whole idea of IP originated here.
Japan did a lot of IP theft in the 50s/60s but I don't think those two are really in the same camp as Russia or China.
The same happened with a lot of semiconductor fabrication and ditto on the tool front with companies like Okuma taking the bread and butter away from the likes of Cincinnati and Bridgeport.
Some of those brands survived but significantly diminished in stature and turnover, some of them turned into little more than patent portfolios.
As for South Korea, it took a bit longer to get of the ground and for the longest time the quality wasn't there but today they are only a little bit under the Japanese but still substantially ahead of the Chinese when it comes to mechanical affairs, and in semiconductors they are an absolute powerhouse.
Also interesting: Almost all powerful industrial countries came through a major war with their infrastructure in tatters, Germany, Japan and South Korea all had their industrial capability decimated by wars, only to bounce back stronger than before, presumably because they (forcibly) shed their old production gear and could start afresh using the most modern technology available. China never really had that advantage which is one of the reasons it is taking them as long as it does to get to parity on the quality front. Outside of Foxconn the work being done in China is still surprisingly manual, though in time obviously they too will automate.
There is a famous Bollywood song from 1955 where the lead actor, the even more famous Raj Kapoor , plays a beggar-like character who sings about "Japanese shoes", which at the time were seen as "cheap knock-offs" only worn by poor people. Here's the song on YT: https://www.youtube.com/watch?v=TdQwPwmsUC0
As opposed to China and Xi Jinping?
https://www.bloomberg.com/news/articles/2018-03-01/xi-set-to...
By who? ZTE already admitted they screwed up. USA can essentially blackball any company in the world, just ask Deripaska, and EUis likely to follow if USA sanctions aren't enough.