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Vol 1, Issue 03, Aug 2019
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ZTE Corporation: In the China-United States Trade War Crosshairs?

ZTE was hit by the export restrictions imposed by the US government on it in March 2018 for allegedly making deals to ship certain parts from US technology companies to Iran in violation of US export controls that barred such sales. ZTE was banned from buying hardware, software and other components from American suppliers for seven years, a tough sentence for a company that sourced up to 30% of its components from the US. The injunction forced ZTE to cease operations, putting the company’s survival at risk. However, in June 2018, US President Donald Trump intervened and lifted the sanctions against ZTE amid escalating trade tensions between China and the US. The ban was withdrawn in exchange for a series of penalties, including the company overhauling its top management, depositing US$400 million in an escrow account, bringing in an American monitoring team and paying a US$1 billion fine. The three-month ban led to more than US$1 billion of losses; ZTE’s share price was battered; and its long-time customers began scaling back deals with it. ZTE might have survived but its future looked uncertain as it reeled from mounting losses, strained relationships with major customers, a management overhaul and political uncertainties. The company’s new management faced the challenge of rebuilding market confidence, curbing financial losses, and gaining the trust of corporate customers.

 What should ZTE’s future strategy be, amid the US-China trade tensions?
What should ZTE do to accelerate domestic technological capabilities to avoid reliance on foreign companies?
How can ZTE rebuild its brand reputation and secure large customers?

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