Chinese tech giant ZTE is expecting that the incoming sanctions by the United States will negatively affect its financial performance. In a filing with the Shenzhen Stock Exchange, the company revealed how its representatives are still cooperating with U.S. regulators regarding the trade restrictions they're facing, but they're unsure how the situation will be resolved. However, ZTE didn't present shareholders with an optimistic outlook on the matter and said that its upcoming settlement with the U.S. Commerce Department will probably affect the financial performance of the company.
ZTE was initially hit with trade restrictions last March but managed to win four reprieves of the sanctions in the meantime. However, the sanctions are now scheduled to come into force in March and while the Chinese tech giant will likely manage to settle the matter with U.S. agencies, it probably won't manage to survive this crisis unscathed, as evidenced by its latest filing with the Shenzhen Stock Exchange. Washington originally sanctioned ZTE due to its alleged violations of the country's export regulations as the Chinese company was accused of importing products to Iran. As ZTE's operations are reliant on products made by the likes of Microsoft and Oracle, an inability to import components made in the U.S. would significantly impact the company's prospects. For added context, approximately one-third of all ZTE's imports currently originate from the United States.
Since the initial reprieve, ZTE took a number of steps to appease the U.S. Commerce Department. Among other things, the company hired a new Chief Export Compliance Officer tasked with dealing with relevant U.S. agencies and also reshaped its management structure. It remains to be seen whether Washington will believe that's enough but there must be a reason why ZTE isn't optimistic about its chances of completely evading any sanctions. The sanctions on Iran that the company allegedly violated were originally imposed due to the plutonium enrichment program of the Middle Eastern country and as President Trump's political platform that got him elected entailed being tougher on Teheran, the current U.S. administration may make an example of ZTE and send a clear message to all other companies thinking about interfering with its foreign policies.