The US President threw ZTE, the third-largest telecommunications company, a life-line on Sunday after the company said it would have to end “major operating activities” due to the US government’s changes to its trade restrictions.
Mr Trump tweeted:
ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.— Donald J. Trump (@realDonaldTrump) May 14, 2018
It came after the Trump government stopped US firms from exporting essential microchips to ZTE for seven years due to a finding that ZTE had sent illegal shipments to Iran and North Korea, thereby violating an agreement with the US government.
According to the head of global emerging markets and Asia Pacific equities at UBS Asset Management, Geoffrey Wong, the fractious trade relationship between China and the US remains a cause for vigilance.
Speaking to Nest Egg, Mr Wong explained that China aims to be independent of foreign technology by 2025, leading to a “fundamental tension” between China and the US.
It will also lead to a key investment focus on semiconductors and telecommunications companies, Mr Wong added.
Continuing, Mr Wong explained the touted sanctions on ZTE would have meant the end of the company for the next few years at least, due to the critical nature of the US-supplied components.
Another major Chinese telecommunications equipment company, Huawei, is also facing similar action with reports it also violated the settlement with the US government.
However, if the Trump administration had flagged it wanted to impose sanctions on Huawei, “it would have had a very similar devastating impact on Huawei. These would have been very aggressive moves”.
Calling Mr Trump’s tweet a “180 degree turnaround”, Mr Wong said the area remains one to “watch pretty carefully”.