China today voiced "firm objection" to the US for slapping sanctions on one of its biggest telecom equipment makers ZTE Corporation, saying it was not the right approach to handle bilateral economic and trade disputes.
"This move will severely impair the commercial activities of Chinese firms. China will continue to engage with the US side on the issue," said a Ministry of Commerce statement.
The US yesterday announced export restrictions on state-owned ZTE and three affiliated entities for alleged violation of US export controls on Iran.
"We do not think it [trade restrictions on a Chinese firm] is the right approach to handle economic and trade disputes. This approach will only hurt others without necessarily benefiting oneself," Foreign Minister Wang Yi said while calling for the two sides to cooperate.
Trading on ZTE stocks in Hong Kong and Shenzhen was suspended from yesterday as a result of the export restrictions.
In a statement, the Shenzhen-headquartered company said that it complied with the laws and regulations of all jurisdictions in which it operates, and it will continue to cooperate with the US side to resolve the issue.
Major Chinese telecom equipment makers, including Huawei and ZTE, have been subject to frequent questioning by US investigators over American information security since 2011, which undermined major deals with US companies.
"Besides the upcoming election in the US, it is likely that the cause is driven by the desire to restrict free trade to contain the development of the Chinese telecommunication sector," said Xiao Yaofei, a professor with Guangdong University of Foreign Studies.
Huawei and ZTE have been active in the US consumer electronics market since the latter half of last year, and the Chinese telecommunication industry, especially terminal products, has gone from strength to strength, Xiao said.
"The US does not want to lose its dominance [...] it is obviously the 'right time' to 'give special treatment' to Chinese companies under the guise of security and international politics," he told state-run Xinhua news agency.
Earlier yesterday, China's Foreign Ministry also urged the United States to revoke its decision to avoid damage to trade cooperation and bilateral relations.
ZTE has 14 offices and 6 research centers in the US. It currently holds about 7 per cent of the US smartphone market, making it the fourth largest manufacturer in the country, after Apple, Samsung and LG. It is also a sponsor of five NBA teams.
The US Commerce Department said yesterday in a public notice that it was imposing restrictions because the company had violated the US export controls on Iran.
The department has added ZTE Corporation, ZTE Kangxun, Beijing 8-Star and ZTE Parsian to the Entity List under the Export Administration Regulations, accusing them of re-exporting controlled items to Iran.
The restrictions will make it difficult for the companies to acquire US products as ZTE suppliers must now apply for an export license before shipping any American-made equipment or parts to ZTE.
