Trump pledges to help Chinese telecoms giant ZTE 'get back into business'

14:43 | 31/05/2018 Cooperation

President Donald Trump has said he will help a Chinese telecommunications company get “back into business”, saying too many jobs in China are at stake after the US government cut off access to its American suppliers.

Chinatopix Via AP, File

At issue is the Commerce Department’s move last month to block the ZTE Corp, a major supplier of telecoms networks and smartphones based in southern China, from importing American components for seven years.

The US accused ZTE of misleading American regulators after it settled charges of violating sanctions against North Korea and Iran.

The case dates to before Trump took office in January 2007 but the Commerce Department’s decision came amid worsening trade tensions between the US and China centered on technology-related intellectual property.

Mr Trump’s unexpected announcement came 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 recognized 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”.

Mr Trump, who has taken a hard line on trade and technology issues with Beijing, tweeted that he and Chinese leader Xi Jinping “are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”.

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 percent 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 Mr 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 1.2 billion dollar (£885 million) fine in the case, had failed to discipline employees involved and paid them bonuses instead.

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