ZTE: When Disaster Strikes

On April 16, 2018, the US Commerce Department forbid American companies to export components, products and services to China’s telecom giant ZTE. This could have been the end of the company, which had already got itself into trouble in 2016 when the United States discovered that it had willfully breached sanctions against Iran and North Korea. After a year-long US investigation into ZTE operations, the United States agreed to continue working with ZTE, stipulating that ZTE had to pay a fine to the US government, fire four top-level executives and penalize 35 other employees involved in the breach. ZTE coughed up the $1.2 billion fine but was lax on punishing its employees. The 2018 ban allegedly was a response to ZTE’s inaction. Now the dispute had spun into the larger Sino-American trade feud, and experts foresaw certain doom for ZTE.

The timing was unfortunate. ZTE had just announced its stellar 2017 performance a month prior, touting a 300% year-on-year revenue growth. Its sales profit had jumped 7.49% from the previous year, totaling ¥108.9 billion ($16.24 billion). Its total capital assets topped ¥143.9 billion. At home, ZTE spent the year maintaining...