Trump, China close to securing export deal to return ZTE to health

Reports suggest that the US government and China are close to closing a deal which could help reverse ZTE's failing fortunes.
Written by Charlie Osborne, Contributing Writer
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The Trump Administration and Beijing are close to inking a deal which would potentially restart ZTE's crippled business.

According to sources speaking to Reuters, the governments are currently finalizing an agreement which would remove an existing US export order which has sent ZTE's fortunes into a downward spiral.

ZTE was hit with a ban by the US Commerce Department which prevented US companies from selling hardware and equipment to the telecommunications giant for seven years.

The export restrictions were imposed after it was alleged that ZTE lied to the Bureau of Industry and Security (BIS) in relation to the discipline of senior staff apparently involved in illegal trade deals with to Iran and North Korea.

Instead of disciplinary measures, ZTE allegedly awarded these executives large bonuses for their participation.

Last year, ZTE agreed to a penalty and forfeiture of $1.19 billion over the scandal, but it was not until the trade ban was enforced that the company's business truly suffered.

The ban prevents the firm from "participating in any way in any transaction" under the US government's Export Administration Regulations.

Following the restrictions, ZTE lashed out, claiming the export ban was "unacceptable" and the firm vowed to fight the decision. However, the decree took its toll quickly and the business was eventually forced to announce that it was ceasing all major operating activities (.PDF).

"As of now, the company maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations," ZTE said. "The company and related parties are actively communicating with the relevant US government departments in order to facilitate the modification or reversal of the Denial Order by the US government and forge a positive outcome in the development of the matters."

As ZTE suffered and Chinese jobs were suddenly put at risk, in an interesting turn of events, US President Trump waded in.

The president -- in his typical fashion -- took to Twitter to announce that the Department of Commerce would be ordered to allow ZTE to purchase components once more.

"President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast," Trump tweeted.

ZTE may still face a number of other penalties in exchange for the removal of the export restrictions.

See also: Trump reverses course on ZTE, citing job losses in China

A potential deal does not mean the ongoing trade war between the US and China is finished, but with a major company and countless jobs on the line, ZTE's hardship may have provided an opportunity for the Trump Administration to set down favorable trade agreements in return for lifting the ban.

The publication reports that the deal may also include China rolling back tariffs on imported US agricultural products, as well as a promise to purchase more of these goods in the future.

One of Reuters' sources said a "handshake" deal has been agreed by US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, and a formal agreement is likely to be secured before or during next week during a visit designed to prevent an all-out trade war between the two nations.

ZDNet has reached out to ZTE and will update if we hear back.

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