Trump says he’s working with China to get ZTE ‘back into business, fast’

Image credit: reuters

US President Donald Trump has tweeted that he wants to help Chinese telecommunications firm ZTE “get back into business, fast” after “too many jobs” were lost in China following the US government's decision to cut off access to American suppliers over security fears.

Last month, the Commerce Department blocked ZTE from importing American components for seven years after it was accused of misleading American regulators following its settlement of charges of violating sanctions against North Korea and Iran.

ZTE is one of the largest suppliers of telecoms networks and smartphones in the world, but has come under fire from Western governments for violating international patents in its products and has been accused of having too close ties to the Chinese government, leading to concerns it could be spying on communications routed through its hardware.

Last month, UK telecom firms were warned to avoid using networking equipment provided by ZTE over concerns that it could have a “long-term negative impact on the security of the UK.” 

Furthermore, Huawei - another Chinese telecommunications firm that has been accused of having close ties to the Chinese government - was banned from providing undersea cables used for international broadband connections by Australia’s security agency in January 2018. 

The decision to ban ZTE comes amid worsening trade tensions between the US and China centred on technology-related intellectual property.

Trump’s unexpected announcement, which came via Twitter, was posted as the two countries prepared to continue trade talks in Washington this week.

“A reversal of the ZTE decision could temporarily tamp down trade tensions by allowing the Chinese to make concessions to the US without losing face,” said Eswar Prasad, a professor of trade policy at Cornell University.

“Trump may have recognised that backing off on ZTE clears the path for him to claim at least a partial victory in the US-China trade dispute based on the concessions the Chinese seem prepared to offer.”

ZTE, which has more than 70,000 employees and has supplied networks or equipment to some of the world’s biggest telecoms companies, said in early May that it had halted its main operations as a result of the department’s “denial order”.

Trump’s tweet was reposted widely by ZTE employees on social media with comments expressing relief, taking it as a sign of an impending settlement.

“Wow! Breaking good news!” a ZTE manager wrote on her WeChat account, pointing to Trump’s remark that the US “Commerce Department has been instructed to get it done”.

“Almost there,” wrote another ZTE employee.

The block on ZTE was a heavy blow for the company, but also hurt the US companies it buys from. According to IDC data, ZTE sources more than 40 per cent of its components from the US, creating a multibillion-dollar revenue stream for suppliers like Qualcomm and Intel.

Chinese officials raised their objections to ZTE’s punishment at trade talks in Beijing earlier this month and the American delegation agreed to report them to Trump.

ZTE has asked the department to suspend the seven-year ban on doing business with US technology exporters. By cutting off access to US suppliers of essential components such as microchips, the ban threatens ZTE’s existence, the company said.

The US imposed the penalty on Shenzhen-based ZTE after discovering that the company, which had paid a $1.2bn (£885 million) fine in the case, had failed to discipline employees involved and instead had paid them bonuses.

Commerce Secretary Wilbur Ross last month accused ZTE of misleading the Department of Commerce and warned: “This egregious behaviour cannot be ignored.”

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