US reaches deal to keep China's ZTE in business: congressional aide

Geraldine Edwards
May 26, 2018

The Commerce Department last month blocked China's ZTE from importing American components for seven years, accusing it of misleading US regulators after it last year settled charges of violating sanctions against Iran and North Korea.

ZTE and Huawei, another Chinese firm, have faced intense scrutiny since a 2012 report from Congress warned that the companies' technology could be used by the Chinese government to conduct surveillance on the U.S.

Washington had agreed to hold back on sanctions in March 2017, provided that ZTE punish those responsible for covering up the Iran sales and paid around two thirds of a US$1.2 billion fine.

If ZTE agrees to the deal, the Commerce Department would roll back restrictions it imposed in April that prohibited USA companies from selling parts to the Chinese firm.

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"The ZTE move was very surprising", said Nathan Sheets, chief economist at PGIM Fixed Income and former undersecretary for global affairs at the Treasury Department under President Barack Obama.

In a statement, a White House official said, "This is a law enforcement action being handled by Commerce".

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After the deal today was reported on, Senate Minority Leader Chuck Schumer tweeted in response, "If the administration goes through with this reported deal, President Trump would be helping make China great again".

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The Senate Banking Committee in a 32-2 vote Tuesday advanced legislation that limited the president's ability to ease sanctions on Chinese telecom companies, requiring the administration first prove to Congress that the company is complying with USA law.

Word of a reported ZTE agreement comes almost a week after the US and China suspended plans to impose tariffs on as much as $200 billion of each other's goods. The Trump administration has pushed China to help cut the $376 billion trade surplus with the U.S, with Beijing so far making only vague commitments to buy more US goods, including farm products and energy. "Simply a fine and changing board members would not protect America's economic or national security, and would be a huge victory for President Xi, and a dramatic retreat by President Trump". In doing two, the two nations pulled back from the brink of a trade war over Chinese demands that US companies hand over some of their technology as the price of doing business in China.

"Both parties have come together today to strongly rebuke ZTE and the administration's soft approach".

On Friday morning Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross asked Republican senators to tone down public criticism and give the administration room to negotiate the matter.

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Shares of ZTE's USA suppliers traded higher on Friday.

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