BREAKING DOWN ZTE AMID U.S.-CHINA DISPUTE

U.S. President Donald Trump injected fresh uncertainty into planned trade talks between U.S. and Chinese officials this week with his weekend social media musings that hinted at easing up on sanctions for China’s ZTE. Here’s a look at the issues:

What is ZTE?

It’s a partially state-owned company based in the southern Chinese tech hub of Shenzhen, next door to Hong Kong, that makes cellphones and network switching and other telecommunications equipment. Last month, the U.S. Commerce Department banned it from buying U.S. technology or products for seven years after it misled regulators by failing to discipline employees involved in illegal exports and paying them bo- nuses. ZTE Corp. pleaded guilty and was hit by a $1.19-billion (U.S.) fine after getting caught shipping cellular network equipment to Iran and North Korea in violation of U.S embargoes. Last week, ZTE said it had suspended major business operations because the U.S. sanctions cut off supplies of needed components and technology.

Trump tweets

Catching many by surprise, Trump tweeted on Sunday that he and Chinese President Xi Jinping “are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost.” Hours later, he tweeted that the U.S. and China were working well together on trade but it would be hard to work out a deal beneficial to both sides. He added, “But be cool, it will all work out!”

Trade talks, part two

During China-U.S. trade talks in Beijing earlier this month, Chinese officials sought help from the U.S. delegation in getting the ban on doing business with ZTE lifted. Those talks made little apparent progress. Sunday’s comments are a confusing prelude to further talks in Washington this week aimed at resolving the worst trade dispute with Beijing in decades.

Interdependence

The U.S. ban is devastating for ZTE because it relies heavily on U.S. technology and parts that are hard to source from elsewhere. U.S. suppliers of technology such as chip makers Qualcomm and Intel, account for 43 per cent of the materials used in its Chinese-made handsets and networking equipment, according to tech research firm IDC.