Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

U.S. Allows ZTE to Resume Some Business Activity Temporarily

Published 2018-07-03, 04:21 p/m
© Bloomberg. Signage is displayed atop the ZTE Corp. headquarters in Shenzhen, China, on Monday, June 4, 2018. ZTE, the Chinese telecom company that's become a focal point of the nation's trade dispute with the U.S., last week replaced one of its most powerful executives in a move that may signal efforts to placate American demands. Photographer: Giulia Marchi/Bloomberg
0763
-

(Bloomberg) -- The Trump administration is letting ZTE Corp (HK:0763). resume some business activities while the U.S. weighs ending a seven-year ban on the Chinese telecommunications company, according to a document obtained by Bloomberg News.

The ZTE authorization by the Commerce Department’s Bureau of Industry and Security is valid from July 2 until Aug. 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 U.S. demands by Aug. 1.

ZTE’s stock surged its 10 percent daily limit in Shenzhen on Tuesday, the biggest jump in more than a year. Its shares in Hong Kong rose 7.6 percent.

The authorization 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 U.S. 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 favor 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 fine, changing its management and providing “high-level security guarantees.”

The about-face sparked concerns of ZTE being used as a bargaining chip in U.S.-China trade negotiations to avert a tariffs dispute. Those talks have stalled and the U.S. is set to impose tariffs on $34 billion of Chinese goods Friday, and another $16 billion may follow. China has said it will retaliate dollar-for-dollar on U.S. 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 U.S. 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 U.S. 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 authorization 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 authorizes “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.

© Bloomberg. Signage is displayed atop the ZTE Corp. headquarters in Shenzhen, China, on Monday, June 4, 2018. ZTE, the Chinese telecom company that's become a focal point of the nation's trade dispute with the U.S., last week replaced one of its most powerful executives in a move that may signal efforts to placate American demands. Photographer: Giulia Marchi/Bloomberg

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.