We Profile Oriza – the Pre-IPO Investment Firm Behind SF Express
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1 Talking Point 6 Week in 60 Seconds 7 Economy 8 Energy and Resources Week in China 9 Banking and Finance 10 M&A 11 Internet and Tech 13 Chinese Model 14 China Consumer 17 March 2017 15 Rail and Infrastructure 16 Society and Culture Issue 358 20 And Finally www.weekinchina.com 21 The Back Page Ins and outs a n i h C e n i g a m I Shi Lirong retires from ZTE in a management reshuffle that followed a US government decision to fine the company $1.2 billion Brought to you by Week in China Talking Point 17 March 2017 Just fine ZTE’s record penalty in the US draws muted response in China Washington woes: ZTE promises to put thousands of staff through export-control training “ f people know you have the big condemning the Chinese firm for a 283 shipments of controlled items Ibazooka, you probably don’t have “brazen disregard of our laws as in - to North Korea with knowledge that to use it,” Wilbur Ross, Secretary of sulting as it was dangerous”. the shipments violated American Commerce in the Trump adminis - After weeks of testy relations export laws. tration, told Bloomberg last week. since Donald Trump took office, the As part of the settlement, ZTE will Ross was talking about how to announcement seemed likely to also plead guilty to two other win trade wars without firing a trigger another round of Chinese charges of obstruction of justice shot. But just two days earlier the 79 protests. Yet the response was sub - and making false statements to fed - year-old billionaire had pulled the dued and ZTE accepted its punish - eral investigators, according to a trigger on one of the most signifi - ment meekly. What is the plea agreement released by the US cant punishments ever of a Chinese background to the case? Justice Department. company by the United States gov - In response the company has ernment. What is ZTE admitting to? agreed to pay the largest ever fine ZTE, China’s second largest tele - The Shenzhen-based manufacturer levied against a non-financial insti - com equipment firm behind has accepted the main charge that it tution. Huawei, has been zapped with a conspired to evade an embargo Apart from $892 million in im - record fine of almost $1.2 billion, by against supplying, building and op - mediate penalties, the Chinese tele - three government agencies in erating large-scale telecommunica - com giant is on the hook for Washington. tions networks in Iran using equip - another $300 million, suspended P h o “With this action, we are putting ment and technology originating in over seven years, during which it t o : R e the world on notice. Improper trade the US. must host an independent compli - u t e r s games are over with,” Ross warned, It was also involved in a further ance monitor. 1 Week in China Talking Point 17 March 2017 How has the fine been accepted in China? When we wrote about the imposi - tion of sanctions last year – which prevented American companies from trading with the Shenzhen- based firm (see WiC317) – we re - ported on the frustration of the Chi - nese authorities, including comments from a foreign ministry spokesperson, that Beijing was “op - posed to the US citing domestic laws to place sanctions on Chinese en - terprises”. There were warnings too that the case was likely to damage Sino-US relations, although senior government officials have said lit - Reshuffled: Yin Yimin (left) takes Zhao Xianming’s role as chairman tle in public about the resolution of the situation last week. were restarted the following year, ZTE’s president before the allega - Wang Yi, the minister of foreign despite assurances to law enforce - tions of the illegal trading with Iran affairs, did refer to it in response to ment officials that the company was and North Korea were first reported, a question about American protec - no longer in breach of the ban. At has become chairman. tionism by reporters at the National the same time ZTE was hiding docu - ZTE also announced last month People’s Congress this month, but ments from the forensic accounting that Shi Lirong, a non-executive di - only in a relatively neutral manner. firm that it had hired to conduct an rector and ZTE’s boss in the period “Are you referring to the news external investigation, and as late as in which the illegal sales were made, about ZTE today?” he queried. “I last year it was running a special had retired. Shi was demoted last want to tell you that the Chinese team to destroy evidence of its ac - year when Zhao took over. government has always opposed tivities wherever it could. unilateral sanctions. But we always With the US government on the Beijing wants to focus on the big - ask Chinese companies to obey the verge of punitive action last year, ger picture? laws of the countries they are doing Zhao Xianming was appointed as The muted response in China so far business in.” ZTE’s chairman and president was a contrast to the tougher talk in Otherwise not much was said and (equivalent to chief executive) with Washington, where Ross seemed to it was the same in the Chinese news - a mandate to reach a settlement. relish his role as the new sheriff in papers, suggesting that the media Last week Zhao put out a concilia - town, despite the origins of the ZTE has been instructed to steer clear. tory statement on confirmation of investigation in the Obama era. In the past the press has de - the fine, acknowledging that the “Those who flout our economic scribed the treatment of ZTE as part company had been at fault but sanctions and export control laws of a long-running attempt to pre - pointing out that it had learned will not go unpunished – they will vent China’s firms from getting a from the experience by creating a suffer the harshest of conse - more commanding grip of the compliance committee and putting quences,” he insisted. American telecom market. thousands of staff though export- Then he laid down the gauntlet, One reason for the recent reti - controls training. saying that he couldn’t imagine cence is that ZTE was caught red- Zhao also highlighted “significant that the Chinese government was handed and it couldn’t deny that it personnel changes” since the inves - unaware of what was going on at didn’t know that it was breaching tigation began and this week there ZTE. But China’s leaders have cho - American export controls. It started was another reshuffle when the sen not to respond, holding fire per - shipping routers, microprocessors chairman and chief executive roles haps as they prepare for the first and servers to Iran in 2010 but called were separated for the first time. round of formal meetings with P h o a halt when Reuters published an ar - Zhao has resigned as ZTE’s chairman their American counterparts. t o : R e ticle in 2012 about violations of the so as to focus on the other role as Xi Jinping, the Chinese president, u t e r s trade embargo. Incredibly, sales president. Yin Yimin, who served as is reported to be travelling to the US 3 Week in China Talking Point 17 March 2017 in the first week of April to meet Trump for the first time, when he Planet China will be hosted at the tycoon’s Mar-a- Strange but true stories from the new China Lago estate. Secretary of State Rex Tillerson is due to visit China even earlier, arriving in Beijing tomorrow. COLLECTIVE BARGAIN. South Korea’s Jeju is usually a hotspot for There was a rocky start to the Chinese tourists. But when the Costa Serena cruise ship docked at the Trump administration’s relations resort island this month, all of its 3,400 Chinese passengers refused to with Beijing after the new president disembark. The boycott came amid tensions over Seoul’s decision to seemed to be contemplating a install the THAAD missile defence system. The refusal left the Jeju tour guides as well as the drivers of 80 shuttle buses with nothing to do. But change to Washington’s longstand - the decision has been cheered across Chinese social media. “Don’t tell ing commitment to the ‘One China’ me we Chinese people won’t stand up together,” one internet user wrote. policy (see WiC349). However, some cooler heads soon discovered that the Chinese tourists The mood has improved since were in fact staff of a direct-sales firm from Hunan called Resgreen. As Trump affirmed his commitment to with several other companies in China it is seeking to exploit the THAAD the status quo in a telephone con - row to boost its own profile. “The company has now made a name for versation with Xi last month. Soon being patriotic,” a netizen noted, adding that by not disembarking in Jeju afterwards Chinese Foreign Minister it probably also saved money by not having to spend on food, Wang Yi met Tillerson at a G20 gath - entertainment and Korean gifts for its staff. ering in Germany, praising him as “a good listener and communicator”. Wang also spoke pragmatically after it was first announced last year. on the day the penalty was an - about ties between the two super - Beijing may also have chosen to nounced to cancel out 80% of its powers last week, when he said that steer clear of commenting further cost, Bloomberg has reported. he believed they “could rise above on the case because of the clear evi - But its corporate customers may old ideas, open new horizons and dence of law breaking.