Home Government Tech Policy ZTE shares set to start trading after deal with US

Chinese telecommunications company ZTE Corporation is set to start trading on Wednesday, after it agreed to an 8 June deal with the US to pay a fine of US$1 billion and overhaul its management in order to lift a ban on doing business with American suppliers.

Apart from the fine, ZTE will also have to place US$400 million in escrow against any future infringements. Shares plunged nearly 40% in Hong Kong when trading began, knocking off about US$3 billion from the company's value.

The company was reported by Reuters as saying it would replace its board and that of its import-export subsidiary, ZTE Kangxun, within 30 days of the order being signed by the US.

Members of the US Congress have, meanwhile, pledged to pass legislation that scuttles the deal. They have attached the bill to the National Defence Authorisation Act, a bill that authorises military spending.

The new penalties that ZTE has agreed to are in addition to the US$892 million already paid to the US to settle charges of not implementing the terms of a settlement for violating sanctions on exports.

In April, ZTE was hit with a seven-year ban on importing components from American companies for breaking US sanctions on exporting goods to North Korea and Iran, and not adhering to the terms of a settlement.

The company, a major player in the global telecommunications equipment business, also agreed to a seven-year suspended export ban which was to take effect if it was found to be in violation of Export Administration Regulations.

Subsequently, the Commerce Department claimed to have found that statements made by ZTE to the Bureau of Industry and Security were false. As a penalty, US firms were prevented from selling components to ZTE for seven years.

ZTE said that all company executives above the level of senior vice-president would be sacked, along with any staff who were connected to the earlier wrongdoing.

The company has also agreed to hire an independent special compliance co-ordinator to keep a tab on its activities on behalf of the US Government.

It has also pledged to resume operations as soon as feasible and announce its first-quarter results.

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.

 

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