It isn’t always Chinese policies that interrupt a company’s ability to do business with a Chinese corporation. In some instances, American policy results in obstacles as well.
ZTE Corporation, a manufacturer of telecommunications equipment in China, has been the recent target for sales bans and other sanctions by the U.S. government. Plans for ZTE continuing to do business with American businesses are now on hold. A U.S. Senate bill named the National Defense Authorization Act contains an amendment preventing this from occurring.
ZTE and other Chinese stock prices plummet
Since passage of the bill, ZTE stocks at one point fell as much as 23.66 percent. Earlier this year, a ban on doing business with ZTE occurred due to rumors that ZTE had business dealings with North Korea and Iran. Even while trade with the company was allowable, share prices fell.
Declines in stock prices also obviously concern talks of a trade war with China. There are continued threats on the part of the U.S. to implement additional tariffs. Such talk already resulted in China’s market seeing sharp declines.
The need for patience and insight when doing business in China
It’s important to keep in mind that any declared trade war with China currently remains mostly a war of words. Threats of prior tariffs have not always occurred. Also, strained relations between the two countries is nothing new. Trade disputes between the two countries have been happening for over 20 years.
There are a large number of factors to consider when doing business in China. There are also a large number of policy decisions made that will impact the ability to do business there that are beyond our control. When investing in a Chinese company, it is invaluable having an attorney who understands Chinese culture, knows how to analyze legal issues, and can advise you through the entire process.