The US reached a deal to allow ZTE Corp to get back in business after the Chinese telecommunications company pays a record fine and agrees to management changes, eliminating a key sticking point as the two countries try to avert a trade war.<\/p>\n
\u201cWe still retain the power to shut them down again,\u201d Commerce Secretary Wilbur Ross said Thursday in an interview on CNBC. He said the Commerce Department\u2019s $1.4 billion fine, including $400 million in escrow, brings US penalties between last year and this year to $2.3 billion.<\/p>\n
The US blocked ZTE\u2019s access to US suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. The company announced it was shutting down just weeks after the ban was announced.<\/p>\n
Under the deal, the ban is suspended for 10 years and can be activated by Commerce should the company commit additional violations during that decade-long \u201cprobationary period,\u201d the department said in a statement announcing the agreement.<\/p>\n
In a memo to ZTE\u2019s employees, Chairman Yin Yimin said the issue mirrored problems in the company\u2019s management and compliance culture.<\/p>\n
\u201cWe should hold relevant people accountable and avoid similar issues in the future,\u201d he wrote. \u201cAfter this issue is resolved, the company will restore operations swiftly and maintain credibility to fulfill its responsibilities.\u201d
\nUS Monitoring<\/p>\n
Ross said the US will install its \u201cown compliance people\u201d to monitor the company, and shareholders will bring in new management and board. \u201cThese collectively are the most severe penalty\u201d the U.S. has ever imposed on a company, Commerce said in its statement.<\/p>\n
ZTE\u2019s deal with the US will likely get it back into business late next week with its stock likely to resume trading in 2-3 weeks, according to analysts at Jefferies in Hong Kong. ZTE suppliers including MOBI Development Co and Zhong Fu Tong Co climbed in Asian trading.<\/p>\n
An agreement that allows the crippled company to reopen was seen as a key Chinese demand as the world\u2019s two largest economies try to avoid a trade war that could undermine global growth. 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 initial fine on ZTE would lead to \u201ctoo many jobs in China lost\u201d and that he would direct his Commerce Secretary to \u201cget it done.\u201d<\/p>\n
The US also needs China\u2019s help negotiating the denuclearization of North Korea ahead of a June 12 summit between Trump and North Korea\u2019s Kim Jong Un.<\/p>\n
\u2018Giant Babies\u2019<\/strong><\/p>\n China\u2019s state media had a lesson for the nation\u2019s companies on Friday: don\u2019t get into the habit of relying on the government for a rescue when you run into trouble. China\u2019s government devoted a lot of resources to save ZTE because it was concerned about the livelihood of its 80,000 employees, but that doesn\u2019t mean such support will always be there, according to a commentary carried on the website of a state radio station.<\/p>\n “Companies shouldn\u2019t be like \u2018giant babies\u2019 and should not use commercial interests to force the government to become involved” in any problems, the article from China National Radio said.<\/p>\n Qualcomm Deal<\/strong><\/p>\n Shares in NXP Semiconductors NV rose 4.9% in New York after news of the ZTE deal was announced. The agreement signals that China will be likely to quickly approve the $43 billion acquisition of NXP by Qualcomm Inc, a deal that has been pending for 18 months. Qualcomm rose 1.3%.<\/p>\n Trump has threatened to slap tariffs on at least $50 billion in Chinese imports shortly after publishing a final list of targets on June 15. China has vowed to retaliate on everything from US soybeans to airplanes, and said it will abandon its commitments if the US follows through on its tariff threat.<\/p>\n \u201cThe Chinese are well aware there\u2019s a new marshal in town,\u201d Ross said. \u201cHis name is Donald Trump and he has a very good shot.\u201d<\/p>\n Members of Congress from both major parties said they were concerned about the deal\u2019s national security implications and some have threatened to block any ZTE deal through legislation that could be part of the national defense spending bill. \u201cI assure you with 100% confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe. #VeryBadDeal,\u201d Republican Senator Marco Rubio of Florida said on Twitter after the administration\u2019s announcement. He was referring to the White House\u2019s recent decision to impose metal tariffs on trade partners including the European Union.<\/p>\n Senate Majority Whip John Cornyn of Texas said national security was \u201cfront and center\u201d of the ZTE deal, and added that replacing the board and requiring compliance officers \u201cgoes a long way to addressing some of my concerns about the national security implication.\u201d<\/p>\n \u201cIf ZTE were to close down, I have every belief that their assets would then be absorbed by Huawei which is another giant telecommunication company. And they would continue their intelligence gathering around the world,\u201d Cornyn told reporters Thursday. \u201cSo shutting down ZTE doesn\u2019t solve the problem.\u201d<\/p>\n Senator Ron Wyden of Oregon, a Democrat and ranking member on the Finance Committee with jurisdiction over trade, and Senate Minority Leader Chuck Schumer of New York called on Congress to reverse the agreement.<\/p>\n Wyden called the deal \u201ca loser for American security and a loser for American workers.\u201d<\/p>\n Trump argues that bilateral trade deficits reflect bad deals for the U.S. that need to be rewritten. US goods exported to China last year totaled $130 billion while Chinese imports to the US totaled $506 billion. That left a US deficit of more than $375 billion.<\/p>\n Meanwhile, the US government is also looking at limiting Chinese investment, and will report by the end of this month how it plans to tighten scrutiny of that. Treasury Secretary Steven Mnuchin wants to rely on legislation to tighten controls, instead of an executive move imposing sweeping new limits, according to three people familiar with the matter.<\/p>\n
\n\u2018100% Confidence\u2019<\/p>\n
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