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BUSINESS & TECH

By Isabelle Li / May 21, 2019 05:56 PM / Business & Tech

Eric Siliang Tan. Photo: VCG

Eric Siliang Tan. Photo: VCG

Chinese news aggregator Qutoutiao hit estimates’ target with strong revenue numbers in its latest quarterly report — despite continued overall losses.

Yet it did surprise on another front: In the same statement, the New York-listed company announced the resignation of its CEO “due to personal reasons.”

Li Lei will remain on the board and serve as a vice chairman, while founder and board chairman Eric Siliang Tan has already taken over the top job, the announcement said.

Meanwhile, Qutoutiao’s first-quarter revenue grew 373.3% year-on-year to a total of 1.12 billion yuan ($162 million). Its monthly active user base has reached 110 million, 18.7% more than the previous quarter’s.

The aggregator's net losses, however, expanded to 688 million yuan, more than double that of the same period last year.

Qutoutiao's share price closed 8.9% down at US$5.12 upon news of the release.

Related: Aggregator Qutoutiao Looks for Light Beyond Shadow of Rival Bytedance

 

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BUSINESS & TECH

By Huang Rong and Zhao Runhua / May 21, 2019 05:15 PM / Business & Tech

The future of Boeing’s 737 Max model is still unclear — and a Chinese aviation giant is getting impatient.

China Eastern, one of China’s largest airlines, has formally requested compensation from Boeing for losses that have been caused by flights affected by the model's safety concerns, the company confirmed to Caixin on Monday. China Eastern is the first Chinese company to confirm such a demand.

In March, the Civil Aviation Administration of China (CAAC) grounded all Boeing 737 Max jets in China, citing safety fears after the second deadly crash by that model of aircraft in five months. CAAC did not give a timeline for the resumption of flights.

China Eastern did not say how much it is asking for in compensation. The company also told Caixin it had not discussed the compensation plan with other aviation companies, though an earlier Bloomberg report said that some were considering raising compensation requests together.

Boeing declined to comment on the issue.

Up until the March announcement, China Eastern operated 14 Boeing 737 Max planes.

Related: Boeing Jets Still Under Review in China as Question of Who Pays for Idled Planes Remains

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By Zhao Runhua / May 21, 2019 02:05 PM / Business & Tech

Photo: IC Photo

Photo: IC Photo

As U.S.-China trade tensions continue, markets are becoming more sensitive to policy signals.

This time, the industry surrounding rare earths – which produces materials used in phones, electric car batteries and LED devices – is in the spotlight.

The stock price of China Rare Earth, a Hong Kong-listed rare earths company specializing in mining and production, has surged roughly 120% at the time of this post.

The surge happened after President Xi Jinping’s Monday visit to a rare earths enterprise in Jiangxi province, which was widely covered by Chinese media including the state-run Xinhua News Agency.

Many industry watchers believe the visit signals China's intention to further support the industry to hedge risks brought about by the trade war.

Rare earths companies listed on the Chinese mainland are also showing strong performances.

Related: China Became Net Importer of Rare Earths in 2018
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By Zhao Runhua and Zhang Erchi / May 21, 2019 11:32 AM / Business & Tech

Ren Zhengfei. Photo: IC Photo

Ren Zhengfei. Photo: IC Photo

The Trump administration may be taking a hard line on banning U.S. chip firms from selling to Huawei, but the Chinese telecom giant is not responding with a similarly harsh attitude.

Huawei will “always need U.S. chips,” CEO Ren Zhengfei told reporters Tuesday.

What the U.S. government chooses to do is beyond Huawei’s control, he added, and the most important thing at the moment is to keep Huawei’s own operations running smoothly.

The U.S. Commerce Department is granting a 90-day period before the full bans go into effect, to give suppliers time to adjust. It will evaluate whether to grant companies exceptions after the 90-day period.

Ren’s comments seemed to signal to U.S. firms that the company is still interested in American chip-related technology. “We can also produce chips as good as the U.S. chips, but it doesn’t mean we are not purchasing those anymore,” he said.

Ren also urged Chinese consumers not to overly associate Huawei with politics. Using Huawei products to show one’s patriotism was unwise and could result in “populism,” which would be harmful to the country, he said.

Related: U.S. Tech Firms Cut Off Huawei

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By Qin Min and Han Wei / May 21, 2019 04:29 AM / Business & Tech

Photo: IC Photo

Photo: IC Photo

China’s top state chipmaker Tsinghua Unigroup Co. Ltd. is reshuffling subsidiaries to consolidate its semiconductor business into a listed arm.

Shenzhen-listed Unigroup Guoxin Microelectronics Co. Monday halted its share trading pending a major asset acquisition. Unigroup Guoxin said it plans to issue new shares to fully acquire Beijing Unigroup Liansheng Technology Co., a unit controlled by parent Unigroup.

The main asset of Unigroup Liansheng is Linxens, a French smart chip components maker that Unigroup acquired last year for a reported 2.2 billion euros ($2.6 billion). The Chinese company has yet to disclose the actual price of the deal.

A source close to Unigroup said the reshuffle is part of Unigroup’s efforts to consolidate its semiconductor assets into the listed arm to enhance business coordination.

Unigroup Guoxin reported 2.5 billion yuan ($360 million) of revenue in 2018, up 34% year on year. Net profit rose 24% to 348 million yuan.

Unigroup Guoxin hasn’t disclose detailed plans for the asset acquisition and said negotiations are still underway.

Related: Networking-Gear Maker Takes Aim at Huawei With Foray Into 5G, CEO Says


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By Han Wei / May 21, 2019 04:09 AM / Business & Tech

Photo: VCG

Photo: VCG

Xiaomi Corp. reported stronger-than-expected 27% revenue growth for the first quarter as the smartphone maker gears up for a new business strategy focusing on internet of things powered by artificial intelligence (AIoT).

Hong Kong-listed Xiaomi posted 43.8 billion yuan ($6.33 billion) of revenue for the three months ended March 31, up from 34.4 billion yuan a year earlier and beating an average estimate of 42 billion yuan in a survey of analysts by Refinitiv. Revenue from international markets grew 34.7% year-on-year to 16.8 billion in the first quarter.

Adjusted net income for the first quarter rose to 2.1 billion yuan from 1.7 billion yuan a year ago, according to Xiaomi’s unaudited results announced Monday.

“We will continue to focus diligently on our “Smartphone + AIoT” dual-engine strategy and greatly expand the number of devices connected to our platform,” the company said.

Xiaomi’s smartphone business booked 27 billion yuan of revenue in the first quarter, a 16.2% rise from a year ago. Smartphone sales totaled 27.9 million units, the company said.

Despite a slowdown in China’s smartphone market as the economy cools, Xiaomi said it expected supportive government policies to benefit the industry. Beijing-based Xiaomi ranked fourth globally in terms of the volume of smartphone shipments during the first quarter, according to Canalys.

Earlier this year, Xiaomi announced a plan to invest 10 billion yuan in the AIoT sector over the next five years as the company seeks to expand into the booming market for smart homes backed by internet of things (IoT).

As of March 31, the number of connected devices, excluding smartphones and laptops, on Xiaomi’s IoT platform reached 171 million units, a year-on-year increase of 70%, Xiaomi said.

Related: Chart of the Day: Xiaomi CEO’s Peerless Pay Packet


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By Zhao Runhua and Hou Qijiang / May 20, 2019 06:56 PM / Business & Tech

Photo: VCG

Photo: VCG

Chinese e-commerce newcomer Pinduoduo has announced strong Q1 performance on Monday – in fact, stronger than expected.

Beating markets’ expectations, the company’s total revenues for the first three months of 2019 surged 228% year-on-year to 4.5 billion yuan ($677.3 million).

The rise was largely driven by revenues from marketing services, paid for by online merchants in order to spur purchases and payments by the app’s users, an unaudited official release shows.

Pinduoduo had a monthly average of 289.7 million users in the quarter – 74% more than the same time last year. And in the twelve-month period ending March 31, 2019, the app boasted 440 million active merchants, up 50.23% year-on-year.

Some investors believe the results demonstrate Pinduoduo’s strong potential – though the company is still yet to profit and reported a net loss of 1.9 billion yuan for the quarter.

Related: Pinduoduo Gives Alibaba a Run for Its Dominance

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By Zhao Runhua / May 20, 2019 06:50 PM / Business & Tech

A newer smart speaker by Baidu. Photo: VCG

A newer smart speaker by Baidu. Photo: VCG

China has blasted past the U.S. to be become the world’s smart-speaker capital.

Just last year, the U.S. was the global leader in shipments of the devices that listen, speak and play audio. But in the first quarter of this year, things changed dramatically.

China shipped more than double the number smart speakers than the U.S. did — 10.6 million units versus 5 million units, a Monday report from market data provider Canalys shows.

This gives China a 51% share of the global market for the quarter; thus, if the trend continues, the country will rapidly dominate the sector.

Canalys’ mobility unit VP Nicole Peng noted that China’s rapid development is largely due to local companies "pouring in a large amount of capital" and offering significant discounts for the products.

In terms of company performances, here’s how the global giants fared, in units shipped:

Amazon — 4.6 million

Google — 3.5 million

Baidu — 3.3 million

Alibaba — 3.2 million

Xiaomi — 3.2 million

Related: Chart of the Day: Smart Speaker Shipments Surge

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By Li Liuqian and Tang Ziyi / May 20, 2019 02:28 PM / Business & Tech

Photo: VCG

Photo: VCG

A few Swiss drone manufacturers are eying forays into the booming Chinese market, Caixin learned in Switzerland last week.

A representative of drone startup SwissDrones said the company will begin selling nine drones in China this year, with the number anticipated to hit 25 by 2020.

Its peer Fixposition is in talks with a Chinese agricultural drone company to replace its American partner that currently provides supporting technology as part of its bid to enter the Chinese agricultural drone market, a company representative said.

Industry watchers said Swiss drone makers would fare better entering market sectors such as agriculture and logistics, rather than compete with market dominator DJI, whose drones are mainly used for filming in media and entertainment industries.

Most drone companies in Switzerland are startups founded within the past five years, according to Simon Johnson, vice president of the Drone Industry Association Switzerland. The country has around 80 drone startups, Alexandre Edelmann, an executive of the Swiss Foreign Ministry, told Caixin.

Related: Engineer Jailed for Leaking Drone Giant DJI’s Code Online

 

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By Chen Xuewan, Luo Guoping and Zhao Runhua / May 20, 2019 01:42 PM / Business & Tech

Photo: VCG

Photo: VCG

The wait is over. After suspending share trading for four years, Hong Kong-listed Hanergy Thin Film has decided to privatize itself.

The firm, a subsidiary of world-famous solar energy giant Hanergy, will delist from Hong Kong on June 11, according to a plan approved by its shareholders on Saturday.

After the privatization, shares belonging to existing shareholders will be temporarily transferred to shares of China Common Rich Renewable Energy Investment, a Hanergy Mobile subsidiary founded in the British Virgin Islands in February, according to company announcements.

An affiliate of Hanergy Mobile will seek an IPO on the Chinese mainland, Eddie Lam Yat Ming, a vice chairman of Hanergy Thin Film Power, said Saturday, without giving a timetable. The affiliate, if listed on the mainland, would then purchase China Common Rich’s shares to allow the latter’s shareholders to become its own – yet some investors worry their shares could eventually become nothing if the plan fails.

Related: Scandal-Plagued Solar Firm’s Comeback Faces Same Old Doubts

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By Shen Xinyue and Jason Tan / May 20, 2019 12:12 PM / Business & Tech

Photo: VCG

Photo: VCG

Beingmate has gotten its act together enough to be taken off the Shenzhen Stock Exchange’s delisting watchlist, but the once-leading infant formula maker still has a long way to go to convince investors that its fundamentals are strong.

A string of issues still shroud the company, market watchers said — including distribution networks that are complicated by family connections, inconsistent information disclosures, and a feud with its major investor, Fonterra Co-operative Group.

Beingmate was founded in 1999 by childcare expert Sam Xie, and went public in 2011. By 2013, it was the leader of the sector in China, the world’s largest market for infant formula, reaping a net profit of 721 million yuan ($104.76 million).

But in subsequent years it amassed debt and saw a rotating cast of CEOs.

So has it finally turned things around? Check out caixinglobal.com later today for our in-depth look at the prospects for this once-high-flying dairy maker.

Related: Beingmate Says It’s Being Good, and Wants Stock Exchange to Stop Stigmatizing It

 

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By Qin Min and Han Wei / May 18, 2019 05:15 AM / Business & Tech

Photo: VCG

Photo: VCG

The Yunnan branch of China Unicom, one of the three big state telecom carriers, will set up a new joint venture with three private partners to develop telecom networks across the southwestern province, marking a major step forward in the state telecom giant’s mixed-ownership reform.

Yunnan Unicom signed an agreement Friday with Hengtong Optic-Electric Co. Ltd., Ningbo Akin Electronic Technology Co. Ltd. and Anhui Sinonet & Xinlong Science & Technology Co. Ltd. on the new venture. The three private investors would jointly hold 85% of the venture, Caixin learned.

The tie-up marks the first mixed-ownership reform initiative in a provincial subsidiary of China Unicom as the central government pushes state enterprises to invite private investors to invigorate business. China Unicom was one of the first to join the pilot reform program two years ago when it formed a partnership with some of China’s biggest high-tech names, which were invited to buy a stake in one of its major units.

Yunnan Unicom has been operating at a loss for several years, and its business has long lagged behind archrival China Mobile in the province. In 2018, the company reported about 1 billion yuan ($145 million) of net loss. Yunnan Unicom started negotiations with potential private investors in October and reached preliminary agreements with the three companies in December.

Related: Unicom Ties Up With Outside Investors in Autonomous Driving


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By An Limin and Zhao Runhua / May 17, 2019 06:44 PM / Business & Tech

Photo: VCG

Photo: VCG

In an industry already haunted by disappointing sales, things may get even worse for Chinese car manufacturers soon.

Now, some fear that China’s new emission standards may be a “black swan,” a term used for unexpected incidents that lead to major chain reactions.

The country will soon adopt the sixth phase of its vehicle emission standards, which China claims is even stricter than the European Union’s. Once it goes into effect, dealers will no longer be able to sell vehicles with that don’t meet the rigid requirements.

As China grew increasingly aware of pollution, the government decided in mid-2018 to move up the implementation date for the new standards in certain prominent areas including Beijing, Chengdu and south China’s Pearl River Delta. The new rules will go into effect in July 2019 – one year earlier than their previously scheduled date.

A senior manager of a dealership told Caixin that the industry's inventories, already affected by sluggish sales, will be worsened as a result, because many consumers are holding off buying as they wait for newer cars that adhere to the forthcoming standards. As such, manufacturers are “messes” internally, busy reducing their current inventories by offering major discounts on cars that don’t meet the standards, the manager told Caixin.

Related: Why Vehicle Sales Have Dipped for the First Time in 28 Years

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By Huang Rong and Zhao Runhua / May 17, 2019 06:36 PM / Business & Tech

Weng Jieming. Photo: IC Photo

Weng Jieming. Photo: IC Photo

China is giving its state-owned tech enterprises a deadline to act on a 2016 call to improve employee incentives.

The government released a document in 2016 encouraging state-owned enterprises (SOEs) involved in tech to issue equity incentives in addition to wages, to improve employees’ enthusiasm and promote creativity. But many have yet to make “substantial” efforts, Weng Jieming, vice chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said Friday.

Centrally-managed SOEs that fall under the scope of the plan, which is aimed at boosting innovation in the lagging state-owned sector, must start setting up trial incentive reforms this year, Weng said.

Weng said some of the SOEs that already began offering staff alternative incentives saw their annual net profit grown more than 40% in 2018.

Related: Regulator Vows Flexibility in State Sector Revamp

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By Wei Yiyang and Liu Jiefei / May 17, 2019 03:59 PM / Business & Tech

Photo: VCG

Photo: VCG

A former JP Morgan executive faces bribery charges for allegedly offering a job to the son of a logistics company chairman in exchange for favorable treatment by the company during its IPO.

Catherine Leung Kar-cheung, former managing director of JP Morgan Chase's Asia-Pacific securities subsidiary, offered the job to the son in January 2010, the Hong Kong Independent Commission Against Corruption said Thursday. The offer was intended to secure the bank special consideration when the logistics firm, which was not named, looked for a bank to hire for its listing. It’s unclear when the IPO took place.

There had been no charges against Leung before she left the company in 2015.

This isn’t the first time the bank has been involved in corruption charges. In 2016, JP Morgan Chase agreed to pay $264 million to the U.S. Securities and Exchange Commission to settle charges that the bank provided favors including jobs for sons and daughters of foreign government officials to win business in the Asia-Pacific region.

JP Morgan Securities began more than a decade ago to hire candidates referred by its clients or potential clients under a client referral program. Employees at or above the rank of executive director or managing director, such as Leung, were also allowed to refer candidates for the junior posts of analyst or associate, ICAC’s statement said.

ICAC is pressing charges against Leung specifically, instead of the bank, Caixin learned from a person close to the matter, who asked not to be named because of the sensitivity of the issue. The referral program was terminated after the bank settled with the U.S. regulator, the person said.

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By Yang Ge / May 17, 2019 01:05 PM / Business & Tech

Photo: VCG

Photo: VCG

China’s answer to Starbucks is just hours away from its trading debut in New York, in what will become one of the biggest new initial public offerings (IPOs) by a Chinese firm on the Nasdaq this year.

So far the signs are looking good for Luckin Coffee Inc., whose rapid-fire opening of thousands of its signature minimalist stores has put it on track to soon pass Starbucks in terms of China outlets.

The company’s American depositary shares (ADS) priced at the top of their range, at $17 to be exact, allowing Luckin to sell 10% more shares than its original plan due to strong demand, a source with direct knowledge of the deal told Caixin. At the end of the day, Luckin sold 33 million ADSs, raising a cool $561 million, the source said.

The shares will make their trading debut when U.S. stock markets open for business at 9:30 a.m. New York time Friday.

That debut will cap one of the fastest listings ever by a Chinese firm in New York. Luckin was founded just two years ago by a group of former rental car company executives, and only opened its first store a year and a half ago. It has been losing major money as it opens new stores at a breakneck pace and offers nonstop promotions to bring people through its doors.

Related: China Starbucks Challenger Boosts Fundraising Target for Fast-Moving IPO

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By Isabelle Li / May 17, 2019 01:04 PM / Business & Tech

Photo: VCG

Photo: VCG

After reports swirled that customers of shared-economy companies – most notably of shared-bike service Ofo – might struggle to get their deposits back, Chinese authorities have stepped in to regulate.

The Ministry of Transport issued rules earlier this month to regulate the deposits needed by sharing-economy companies, to take effect on June 1, that restrict how much money companies can collect from users and what they can do with it.

Sharing-economy companies should avoid collecting deposits from users in general, and any deposits that are collected should be kept in users’ own accounts, or specific accounts set up by the companies for that purpose, the rules say.

Deposits for shared-bike services should not exceed 10% of the average cost of a bike, while for shared cars, the upper limit should be 2% of the vehicles’ average cost under new regulations.

Related: Authorities Unveil Draft Rules to Curb Abuse of Sharing-Economy Deposits

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By Zhao Runhua and Qin Min / May 17, 2019 12:23 PM / Business & Tech

Photo: VCG

Photo: VCG

Wartime generals plan for the worst. And the head of Huawei’s chip unit has drawn up her battle plan, according to a recently leaked document.

The chip unit’s CEO — He Tingbo — said Huawei foresaw years ago that the U.S. government might “suppress” the company and cut channels for it to acquire chip-related technology from the U.S.

And indeed, this fear has become a reality.

The U.S. Department of Commerce said Wednesday it was putting Huawei on a blacklist that could ban it from doing business with its American suppliers. The company responded that it will pursue “remedies immediately and find a resolution” if its business is banned in the United States.

The move may especially disrupt Huawei’s chip production, which depends heavily on American components. Therefore, the chip unit, called HiSilicon, has developed “alternative chips” for just such a scenario — though it did not expect the situation to actually happen, the letter reveals.

As the U.S. made the “insane” decision to put Huawei on the blacklist “with no evidence,” and “history has made the choice” to put all reserved alternative chips into formal use “in one night,” the letter said.

Meanwhile, Huawei's smartphone business is plowing forward. It unveiled its 5G smartphone Mate 20 X in London on Thursday, state-run Xinhua News Agency reported. The Mate 20 X uses the Balong 5000 chip, which was released in January before Huawei's shift toward using "alternative chips."

Related: China Opposes U.S. ‘Unilateral’ Action Against Huawei

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By Han Wei / May 17, 2019 06:34 AM / Business & Tech

Photo: VCG

Photo: VCG

Chinese search giant Baidu Inc. reported its first loss since going public in 2005, reflecting slowing sales and rising business costs.

Baidu posted a net loss of 327 million yuan ($47.3 million) for the first quarter ended March 31, compared with net income of 6.69 billion yuan a year earlier, according to Baidu’s unaudited financial report released Thursday.

Revenue grew 15% for the quarter to 24.1 billion yuan, Baidu said. Online marketing revenues, a major contributor to overall sales, rose nearly 3% to 17.66 billion yuan, mainly backed by growth in education, retail and business services, the company said, while health care, online games services and financial services were less vibrant.

"Despite government policies to improve the market condition for small and medium enterprises, we anticipate online marketing in the near term to face a challenging environment," Chief Financial Officer Herman Yu said.

For the second quarter of 2019, Baidu expects revenue to be between 25.1 billion yuan and 26.6 billion yuan, falling below analysts’ expectations. Its shares were down 8% in extended trading.

At the end of March 2019, the company had 174 million daily active users, up 28% from the year-ago period.

While announcing the first quarter results, Baidu said it accepted the resignation of Xiang Hailong, senior vice president of the search business. Xiang served at Baidu for 14 years.

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By Qin Min and Han Wei / May 17, 2019 02:52 AM / Business & Tech

Photo: VCG

Photo: VCG

China’s telecom equipment giant Huawei Technologies Co. Ltd. said it will pursue “remedies immediately and find a resolution” in face the threats of a business ban in the United States.

The U.S. Department of Commerce said Wednesday it was putting Huawei on a blacklist that could ban it from doing business with its American suppliers. The department did not specify when that would happen. The move came shortly after President Donald Trump signed an executive order that could effectively ban the Chinese company from selling technology in the American market.

A possible U.S. ban on Huawei’s equipment is in "no one’s interest" and will cause massive economic loss for Huawei’s business partners in the U.S., the Chinese company said late Thursday in a statement.

Huawei said it is working on measures to reduce the impact, without providing details. China’s Commerce Ministry opposed the U.S. move against Huawei and threatened to retaliate.

“We urge the U.S. side to stop its wrong practice, create conditions for normal trade cooperation for companies of the two countries and avoid further impacts on China-U.S. trade relations,” Ministry of Commerce spokesperson Gao Feng said Wednesday. “China will take all necessary measures to protect Chinese companies’ legal rights.”

Related: China Opposes U.S. ‘Unilateral’ Action Against Huawei


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