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China to defend 'rights' after US ZTE ban

April 17, 2018

ZTE had failed to take promised remedial actions after conspiring to illegally ship US goods to Iran. The US reacted to that failure by slapping a seven-year ban on US sales to the Chinese phone maker.

ZTE Smartphone in Barcelona
Image: Getty Images/AFP/J. Lago

China said on Tuesday it would protect its "rights and interests" after the US banned American companies from selling parts to Chinese phone maker ZTE for seven years.

The ban followed ZTE's failure to comply with a 2017 agreement with the US government to discipline employees who had overseen plans to ship equipment to Iran.

Read more: China renews pledge to 'fight back' in trade row with the US

US ban on ZTE sales:

  • After a five-year investigation into the company, ZTE pleaded guilty in a US federal court in March 2017 to conspiracy to violate US sanctions on Iran by illegally selling US technology to the country.
  • Following the guilty plea, the company agreed with the US government to pay $890 million (€720 million) in penalties and fire four senior employees and discipline 35 others, a Commerce Department spokesman told Reuters news agency.
  • ZTE told the Commerce Department in March it had fired the four senior employees, but had not disciplined the 35 lower-level employees.
  • The US Commerce Department ordered the ban in response. Under it, US companies cannot export components to ZTE for seven years beginning immediately. The company could also face an additional $300 million penalty.

Read more: WTO warns over US-China trade war

What were the reactions?

China's Commerce Ministry said it would "stand ready to take necessary measures to safeguard the legitimate rights and interests of Chinese companies."

ZTE said it was examining the US decision and communicating with "relevant parties."

Read more: The Chinese copycat turns innovator

Severe action: The US ban threatens ZTE viability as the company is estimated to receive 25 to 30 percent of its components from US firms. ZTE shares, which trade in Hong Kong and Shenzhen, have been suspended.

ZTE under suspicion: The Chinese company has raised concerns among US lawmakers about how independent it is from the Chinese government. In February, two Republican senators proposed blocking the US government from buying or leasing ZTE products.

Trade scuffle: The US ban has come amid a broader trade dispute between Washington and Beijing that began after the US announced tariffs on steel and aluminum. Both sides have since threatened retaliatory actions, raising fears of a trade war breaking out between the world's two largest economies.

Read more: EU drags US to WTO over steel, aluminum tariffs

amp/aw (AP, Reuters)