Tuesday, 17 July 2018 06:19

ZTE shares rise 17% in HK as US deal completed

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The shares of Chinese telecommunications outfit ZTE Corporation rose 17% in Hong Kong trading on Monday after the company met the final condition laid down by the US Commerce Department for resuming its business operations in the US.

ZTE deposited US$400 million in an escrow account to meet the US' demands, the final part of a deal that also included the company paying a US$1 billion fine, Reuters reported.

The Chinese company was hit with a seven-year ban on using American-made parts in its equipment in April for violating the terms of an agreement over breaking sanctions on exporting products to Iran and North Korea.

ZTE shut down its main business activities in the US on 9 May.

But following the intervention of US President Donald Trump, a deal was worked out for ZTE to return to business by paying a fine of US$1 billion, changing its management team and depositing US$400 million in an escrow account against possible future transgressions.

Reuters quoted IDC analyst Nikhil Batra as saying on Monday: "“It’s a long way back for ZTE. Not just to win back customer confidence and assure them, but also work hard to find substitutes to U.S. suppliers such as Avnet, Qualcomm, Broadcom etc (to reduce reliance).

“Essentially, this would mean going back to the drawing board and rethinking its overall design strategy.”

ZTE's shares opened up 5.5% on the Hong Kong index and then rose by more than 17% to HK$16.12 by noon. But that was still 37% lower than when the shares stopped trading in April.

Some politicians in the US are trying to rescind the deal, and have inserted material in the Senate version of the National Defence Authorisation Act that would reinstate the ban.

But US President Donald Trump is expected to negotiate and get the ban stripped out of the final version of the bill. The House has already passed a version of the bill that does not include the sales ban.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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