US gives ZTE some room to operate
COMMERCE DEPARTMENT ALLOWING CHINESE TELECOMMUNICATIONS COMPANY ACTIVITY UNTIL AUGUST 1
The Trump administration is letting ZTE Corp resume some business activities while the US weighs ending a sevenyear ban on the Chinese telecommunications company, according to a document obtained by Bloomberg News.
The ZTE authorisation by the Commerce Department’s Bureau of Industry and Security is valid from Monday until August 1. While it wasn’t immediately clear when a permanent order will follow, a person familiar with the matter said ZTE is expected to be in compliance with US demands by August 1.
ZTE’s stock surged its 10 per cent daily limit in Shenzhen on Tuesday, the biggest jump in more than a year. Its shares in Hong Kong rose 7.6 per cent.
The authorisation permits China’s No 2 maker of telecoms gear to support existing networks or equipment under contracts signed on or before April 15, when the US blocked companies from selling components to ZTE for violating sanctions against Iran and North Korea. The ban had forced ZTE to announce it was shutting down.
President Donald Trump reversed course in May, saying he was reconsidering penalties on ZTE as personal favour to Chinese President Xi Jinping. Later that month, the Trump administration announced it would allow the company to stay in business after paying a $1.3 billion (Dh4.7 billion) fine, changing its management and providing “high-level security guarantees”.
Bargaining chip
The about-face sparked concerns of ZTE being used as a bargaining chip in US-China trade negotiations to avert a tariffs dispute.
Those talks have stalled and the US is set to impose tariffs on $34 billion of Chinese goods tomorrow, and another $16 billion may follow. China has said it will retaliate dollar-for-dollar on US imports.
ZTE took a major step forward in meeting the White House’s conditions by sacking its entire board and appointing a new chairman last week. A US Commerce official said on June 22 that ZTE was close to clearing the final hurdle, by paying $400 million in escrow.
ZTE’s new management now faces the challenge of rebuilding trust with phone companies and corporate customers. The company is said to be facing at least $3 billion in total losses from the months-long moratorium, which cut off the flow of chips and other components it needed to make its networking gear and smartphones.
In Washington, a bipartisan group of lawmakers remains concerned about ZTE’s threat to US national security and is pushing for legislation aimed at restoring harsher penalties. Lawmakers are set to resume negotiations on legislation that will try to balance concerns that ZTE presents a security risk with efforts to get the company back into business.
This week’s authorisation lets ZTE give support, including software updates, for ZTE phone models that were available to the public on or before April 15, and it allows parties to make and receive payments for permissible ZTE transactions. The order also authorises “the disclosure to ZTE of information regarding security vulnerabilities in items owned, possessed or controlled by ZTE” to protect communication networks and equipment, it said.