In April, 2018, US govt announced that all US companies are banned to sell any hardware and software to a China tech company ZTE for 7 years. As a giant electronics company, ZTE is one of largest telecom infrastructure equipment suppliers all around the world and the fourth larggest smartphone sellers in US, the first three are Apple, Samsung and LG. In 2017, ZTE’s revenue is over 100 bn RMB (US $15 bn). This punishment is because that ZTE has lain to US govt. In 2017, ZTE paid US govt US $892 Mn as punishment for illegally exported goods to Iran. And ZTE agreed to punish 35 employees. But later US govt found that instead of punishing the 35 employees, ZTE actually praised them.

In China, the most famous and legendary company is Huawei. Years ago, ZTE was even better than Huawei. But finally Huawei became much more successful than ZTE, personally I think it is because ZTE is a state-run company, the management system is corrupted. Many former state-run employees say in state-run rompanies, relationship is much more important than personal quality. Most chief managers are families of Govt officers, and their salaries are extremely high (normally one year 1 Mn RMB – US $150k is only a starting salary ), even though generally rarely really contribute to company, but even trying to make state-own property to be their own. And actually the western world doesn’t recognize China economy as MARKET ECONOMY, even though China govt insists it is. But the truth is that state-run most companies get orders with help of govt. For e.g. China govt doesn’t allow private companies to run business in oil, telecom operation, banking and amny other major industry. While only a few state-run enterprises have been monopolizing those industries for decades. China has been investing a lot in infrastructure construction such as high speed trains. For those govt projects, state-run companies have much moe priorites than private companies. Even they can sell lower quality products at a higher price than private companies. It is like Jack is a mayor and there is a $10 Bn public metro project. And Jack’s son is CEO of a state-run or private company. Jack secrectly gives the order to his son, even though there is a so-called public fair bidding. In the govt, most officers get benefits from Jack and afraid of him. To the public, govt doesn’t release true infomation or even lie. State-sun companies have become privileged class’s tools to rob Chinese people, nothing related to welfare of ordinary people.

Personally I agree that China economy is not a market economy just like western world said. Many foreign companies complain it is too hard to do business in China, you need know Guanxi and how to steal business secret, majority doesn’t have patience to make a real good products, IP is not well protected and respected, etc. Actually not only hard for foreign companies, but also very hard for China domestic private companies. I think what makes China business so hard and unfair is the corruption of govt. Think about it, if you are an owner of private company, work really hard for surviving. You and a state-run company both bid for a highway project. Your team has been working hard for months to come up with a good solution and good price. While the state-run company just easily won with a shabby solution but much higher price. Then can you still behave like nothing happened and continue working hard, can you still believe in that better quality and competitive price is the key of wining order? You probably understand that Guanxi (relationship) is much more important than product/service and price, and you probably start to learn take shotcut. Even though you don’t want to, you have to if want to survive.

People may be astonished that ZTE really dared to sell to Iran and even praised the 35 employees (ecomomic criminals to US) after paid around $900 Mn forfeit. Why ZTE didn’t obey agreements with US govt and didn’t punish those 35 employees? I think fisrt it is because the 35 employees must have Guanxi (relationship with chief govt officers). Second, because the state-run companies are too corrupted, cannot make a right decasion. They get used to taking shotcut and cheatting, there is no respect to laws and rules in their blood. Third, state-run companies always believe that Beijing is getting their back.

This news has become headline of China domestic media. But what they are focusing on is that Trump is trying to start a trade war, punishment to ZTE is a kind of cold war like US against SU. I think it is meaningless and stupid, do they really think nationalism can save made in China, can improve China technology? Also main media say China need to develop IC technology, it is dangerous to rely on foreign IC companies. Once they don’t supply core IC hardware and software, made in China will die. Yes it is true. But what they don’t mention is that many Chinese companies like ZTE don’t obey rules & laws and compete illegally, invest more on Guanxi (relationship) than technology.

What I believe is that China govt need to transform from RULE, CONTROL, to SERVE. Stop robbing people by unfair competition, by controling resource, even in the name of protecting people, in the name of law and fairness, don’t be too greedy. When govt becomes transparent, the world and Chinese people will feel safe. When China economy is a real market economy, people will truly benefit from growing of China. Otherwise, more powerful China becomes, more threat the world feels.