Senior executives should strengthen company's core business
Telecommunication equipment provider ZTE Corp will reportedly replace three senior executives on Tuesday, which will not affect the company's operations, analysts said.
CEO Shi Lirong, along with two other executives - Tian Wenguo and Qiu Weizhao, leaders of the export control management project team - will step down amid a sanctions dispute with the US Department of Commerce (DOC), the Wall Street Journal reported during the weekend.
ZTE's board of directors will meet to approve the new team, and changes will be made public in a stock exchange filing on Tuesday afternoon or evening, ZTE spokesman David Dai Shu was quoted as saying by Reuters on Monday.
Dai said ZTE reshuffles its management every three years, and the forthcoming changes are in line with the company's regular schedule, according to Reuters.
ZTE did not comment on the media reports when it was contacted by the Global Times on Monday.
However, the company noted it is to announce its financial results for 2015 on Wednesday night, a move that was delayed by U.S. sanctions in March.
The Bureau of Industry and Security (BIS) of the DOC published on March 7 two confidential documents obtained from ZTE, claiming that the Chinese company had violated U.S. export control laws by establishing, controlling and using a series of detached companies to illicitly reexport controlled items to sanctioned countries without authorization, according to the official website of the DOC.
In this circumstance, the BIS has added ZTE and three of its affiliates to the Entity List, which includes foreign entities that are subject to specific license requirements for export, reexport or transfer of items subject to U.S. Export Administration Regulations.
Replacing the executives could be seen as a major settlement reached between the company and the DOC, said Xiang Ligang, a Beijing-based telecom industry expert.
"However, it doesn't necessarily mean that the company has been seriously affected as it has mature corporate strategies," Xiang told the Global Times on Monday.
Tian and Qiu were two leaders of the company's export control management project team, which was dedicated to studying ZTE's export control risks in trading with five major embargoed countries - Iran, Sudan, North Korea, Syria and Cuba, according to one of the confidential documents.
Reshuffling of a management team is "normal," especially for multinational corporations, said Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation.
"It may not be directly related to the U.S. sanctions, considering the available information about the issue," Bai told the Global Times on Monday.
Besides, the U.S. has already temporarily lifted the sanctions on ZTE, and it should take the interests of both parties into account in dealing with the trade dispute, Bai noted.
The U.S. government plans to temporarily lift export curbs it imposed on ZTE, an unidentified senior official from the DOC was quoted as saying in another Reuters report on March 21. The relief will be temporary in nature and will be maintained only if ZTE abides by its commitments to the U.S. government, according to the report.
The issue is not only relevant to multilateral trade activities, but also has become a political issue, Xiang said. Still, it has served as a lesson to Chinese companies that invest in the U.S., he remarked.
"For example, how to avoid potential risks and act in line with the local laws and regulations should be thoroughly studied by Chinese companies," Xiang said.
He also noted that ZTE should improve its management while continuing to strengthen its core business, such as chip production technology, to reduce its dependence on U.S. customers.
