Can ZTE bounce back?
China tech-firm ZTE saw its stock rise 25% on Thursday following a government announcement that the US ban will soon be removed.
The US Commerce Department first created the ban on the tech firm because of its trade with North Korea and Iran – despite the sanctions the US placed on those countries. The ban forbade any American company from selling its technology to ZTE, on which the company desperate relies.
Recently, President Trump agreed to remove the ban if the company pays a $1 billion fine, completely changes its management, and puts $400 million into an escrow account. Last month, ZTE accomplished the first two tasks, and on Wednesday, they set up the escrow account. Consequently, once they put the money into that account, the Commerce Department will lift the ban.
Consumers and investors will need time before they truly trust ZTE, as their stock plummeted 72% following the ban. Production will take time to get rolling again, and the company may face new learning curves with their recently hired executive team. However, for now, investors seem to be optimistic, as their stock jumped 25% on Thursday.
A frightening part about this entire ordeal is what it might mean for national security. ZTE and China have now placed a target on the United States’ back because of this ban and these punishments, so the country might see some backlash in the near future. When one couples that with the impending trade war between the countries, diplomacy seems dead.
Featured image via Flickr/John Karakatsanis