ZTE strikes deal with US
Chinese companies can learn lesson: trade expert
A Chinese trade analyst said on Friday that Chinese companies can learn a lesson from ZTE after the telecom firm struck a deal with the US that includes paying a $1 billion penalty and having a US-chosen compliance team on board to resolve a high-profile dispute with the US.
US Secretary of Commerce Wilbur Ross announced a ZTE settlement agreement under which ZTE must pay $1 billion and place an additional $400 million in suspended penalty funds in escrow before the US Commerce Department’s Bureau of Industry and Security (BIS) removes ZTE from the Denied Persons List.
“ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years,” said a statement posted on the department’s website.
ZTE is also required under the agreement to replace the entire board of directors and senior leadership, according to the statement.
ZTE said in an internal letter to staff late Thursday night that it hoped the staff members could stick to their posts and not be affected by rumors, cs.com.cn reported on Friday.
Staff could draw a lesson from the bitter experience and unswervingly adhere to the bottom line of compliance, said the letter, according to the Beijing-based financial news website.
The settlement caused great losses to ZTE and the company paid a heavy price, the letter said.
ZTE will soon resume operations after the removal of the denial order, it added.
ZTE declined to comment as of press time on Friday.
Huo Jianguo, a senior research fellow at the Center for China and Globalization in Beijing, told the Global Times on Friday that “despite the heavy penalty and harsh conditions, it is a good thing from the perspective of ZTE’s development, as the problem [of the denial order] is finally resolved.”
From this incident, Huo said, “ZTE and other Chinese companies should learn the lesson of being more prudent in their operations overseas.”
Problems involving trade and cross-border investment should not be involved in political disputes. Instead they should be solved through professional consultations, Huo said, while noting the solution to ZTE’s problem would also benefit US companies like ZTE’s supplier Qualcomm.
On Thursday, Shanghai-based Fullgoal Fund Management Co announced it would lower the valuation of ZTE shares, Shanghai-based capital market news site cailianpress. com reported.
The valuation of ZTE’s A shares was lowered to 20.04 yuan ($3.13), while the Hong Kong-listed shares were valued at HK$16.38 ($2.09), a drop of about 36 percent in both cases, compared with the price of ZTE when trading was suspended on April 17.
In May, China’s exports to the US were $39.3 billion, a 13.6 percent year-on-year increase, and imports from the US stood at $14.73 billion, an increase of 11.9 percent year-onyear, data from Chinese customs showed on Friday.
That brings the Chinese trade surplus with the US to $104.8 billion in the first five months of this year.