Sunday, 24 June, 2018

No agreement yet between US, China on ZTE: Trump aide

ZTE has been banned from purchasing sensitive technology from the US over its illegal sales to Iran and North Korea Report Tentative ZTE Deal with U.S. Could Bring Fine to $1.7B AFP 5 Jun 2018Washington DC
Kenneth Drake | 08 June, 2018, 10:47

After a personal plea from Chinese President Xi Jinping to help the company get back into business, President Donald Trump said last month that the punishment of ZTE would lead to "too many jobs in China lost", directing the government to fix the situation.

Commerce Secretary Wilbur Ross on Thursday announced a deal with Chinese telecommunications company ZTE that includes a $1 billion fine - a move that may indicate progress in high-stakes trade talks between the USA and China.

The immediate ramifications of this deal are that although ZTE is becoming cash-poorer, this will allow them to resume day-to-day business operations and get the business moving again.

In April, the Chinese group was cut off from USA technology products for violating U.S. sanctions against North Korea and Iran - measures which threatened to put ZTE out of business.

An agreement in principle is not a final agreement but is a step toward it. Commerce Department spokesman James Rockas told Reuters that "no definitive agreement has been signed by both parties". The ban also hurt American companies that supply ZTE.

Shares of USA companies that do business with ZTE rose on Thursday.

"I assure you with 100 percent confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe", Republican U.S. Senator Marco Rubio tweeted with the hashtag #VeryBadDeal.

ZTE has become a critical part of the broader discussions between China and the U.S., the two largest economies in the world, over trade tensions and whether the two countries can prevent a trade war that could involve billions of dollars' worth of tariffs.

■ ZTE must also change its board of directors and executive team within 30 days.


Last year, ZTE paid over $2.3 billion to USA suppliers, a senior ZTE official told Reuters last month. "We can not move forward with this danger to national security without doing something about ZTE".

Commerce Secretary Wilbur Ross told CNBC on Thursday the deal was tough and would keep ZTE on a short leash.

Senator Ron Wyden of OR, a Democrat and ranking member on the Finance Committee with jurisdiction over trade, and Senate Minority Leader Chuck Schumer of NY called on Congress to reverse the agreement. "The Chinese public was up in arms because they believed the US was destroying ZTE". This compromise would allow the company to once again use USA -made components in their products-although at a large cost. The U.S. position has been that the fine is a law enforcement action, which should not be included in the discussions around trade.

United States officials say China last weekend offered to buy an additional $70 billion in U.S. goods to cut the trade deficit - on condition that Trump call off the planned tech-sector tariffs.

A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China May 14, 2018.

Shares in NXP Semiconductors NV rose 4.9 percent in NY after news of the ZTE deal was announced.

"The hope is accommodating China's concerns on ZTE will open the door to favorable decisions on Qualcomm and other deals", said Altbach.

Oclaro shares are up 1.1%.

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