Absence does not always make the heart grow fonder. On Thursday shares in ZTE, the Chinese telecom equipment maker, resumed trading after a one-month suspension. The market sold them down by one-tenth.
They may have further to fall. In early March, the company said it was under investigation by the US for violating controls on exports to Iran. US companies were barred from selling products to ZTE (although they were subsequently permitted to do so under licences that run until June). On Thursday, at the reopen, ZTE said the outcome of the investigation was “highly uncertain”.
The incident is a reminder of Chinese companies’ reliance on US technology. Nomura estimates that ZTE sources up to 15 per cent of its inputs by value from the US. Given the risks that have come to light, this will have to change. But China’s efforts to acquire US technology outright has had mixed results. State-backed Tsinghua Unigroup’s bid to buy Micron failed, although chip designer Integrated Silicon Solutions was sold to a Chinese buyer. ZTE peer Huawei, which announced stellar numbers last week, has taken an alternative tack: last year, it spent 15 per cent of revenues on research and development, up one percentage point from 2014. That is in line with tech leaders such as Broadcom, and a few percentage points above ZTE.