China reacts after ZTE hit again in the US

CHINA’S Ministry of Commerce yesterday urged the United States to create a fair, just and stable legal and policy environment for Chinese companies.

This came after the US Department of Commerce announced “activation of denial of export privileges” against leading Chinese telecom equipment maker ZTE Corp for alleged violations of the Export Administration Regulations.

China “will closely track the case and is ready to take necessary measures to protect the legitimate rights and interests of Chinese companies,” said a spokesman for the Ministry of Commerce.

ZTE has extensive trade and investment cooperation with hundreds of American companies, creating tens of thousands of jobs in the US, the spokesman said. “China has consistently asked Chinese companies to comply with the laws and policies of host countries and manage their businesses in line with laws and regulations.”

The US on Monday banned American firms from selling parts and software to ZTE for seven years.

“At present, the company is assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly,” ZTE said.

ZTE, whose Hong Kong and Shenzhen shares were suspended from trading yesterday, has set up a crisis management group in response to the ban, according to a ZTE source.

In March last year, ZTE reached settlements with US authorities over American export controls and sanctions charges.

The ZTE agreed to pay a criminal and civil penalty of about US$892 million and an additional penalty of US$300 million that will be suspended during a seven-year probationary period to deter future violations.

At that time, the US Department of Commerce recommended ZTE be removed from the Entity List under the Export Administration Regulations. But it will be subject to ZTE’s compliance with the settlements during the sevenyear probation period.

In a statement on Monday, the Department of Commerce claimed that the Shenzhen-based company made false statements regarding supervision of its staff and senior management.

With this claim, the Department of Commerce decided to suspend the export privileges of ZTE for a period of seven years until March 13, 2025. This decision suggests that ZTE could be unable to import high-tech components from the US in these years.

ZTE has 14 offices and six research centers in the United States and supported nearly 130,000 high-tech jobs in the country.

ZTE is China’s No. 2 telecom equipment maker after Huawei Technologies Co, the No. 4 seller of smartphones in the US, and was worth some US$20 billion as of Monday’s close.

In 2017, ZTE derived 59 percent of revenue from its network business and 32 percent from its consumer business.