New ZTE Disclosures

We finally get a view into the quick withdrawal of sanctions against ZTE, and the way ZTE seeks to resolve the issue with the US government.

Juro Asawa, in Saturday's Wall Street Journal, writes about what ZTE is announcing it will do in order to mitigate the actions taken by members of its Board of Directors to sell embargoed items to Iran. [China's ZTE to Replace Three Senior Executives, 2 April 2016]   In the US these kinds of actions would be severe and impact the Board in ways that would resonate for a long time.  We tend to see China's actions in the same light, when the government systems are not the same.

Chinese company executives are given jobs because of their positions in the Party, as much as their business acumen.  There are several executive replacements that have taken place over the years, mentioned in my first book on Chinese Information War.  Most of them had to do with a business leader taking a track that was not in line with the central government leadership.  So, we might think that this action by ZTE would represent a set of "rogue executives" doing something the government did not condone or sanction.  Usually, that kind of action results in a business leader disappearing and not coming back while he is questioned by the government.

Clare Baldwin, writing for Reuters, says the ZTE representative on a call yesterday claims these management realignments take place every three years and this is just one of those events.  However, he also said, "ZTE spokesman Dai said he could not confirm which executives would be involved in the management changes to be announced on Tuesday, and could not comment on whether the upcoming changes were related to the alleged Iran sanctions breach in any way. 'I cannot speculate on this type of discussion,' he said. 'I am not in a position to comment.' " Treating the move as a normal action indicates the Board members were not involved in the kind of activity that the government objected to.  An Asian Age story [http://dailyasianage.com/news/15162/chinas-zte-executives-to-step-down] on the same thing treats this like a spat that has nothing to do with ZTE.  The US sanctions caused the individuals to be removed.  The article does not mention that the ZTE internal documents cite the setting up of dummy corporations and defined export rules that would be violated in doing so. They also clearly show that other Chinese companies were doing the same thing.  No company in China is going to sell anything to Iran without the central government knowing about it and sanctioning it.

So, at least we now know what was agreed to settle the clear violations of US Export laws by ZTE.  What we don't know is why that kind of action was acceptable to the U.S. government.  Treating this as a rogue couple of executives ignores the role of the central government in controlling Chinese companies.  This almost sounds like the State Department view of the world.