US-China trade talks in advance
China and the US have agreed on the “broad outline” of a settlement to the seven-year ban on ZTE buying American technology, ending a punishment that threatened to put the company out of business, The Wall Street Journal reported.
The details are still being worked out but would include major changes to management, the board and potentially significant fines, the newspaper said Tuesday, citing unidentified people familiar with the matter. Larry Kudlow, President Donald Trump’s top economic adviser, said over the weekend that similar measures would be needed before the US would consider a reprieve.
A spokesperson for ZTE declined to comment on the WSJ report on Tuesday. At a regular foreign ministry briefing in Beijing, a government spokesman said that the joint China-US statement on economic and trade consultations issued at the weekend had covered the matter. The two countries have reached an important consensus on their trade relations and are working out the details, the spokesman said.
The WSJ reported a week ago that any reprieve for ZTE would also involve Beijing removing tariffs on billions of dollars of US agricultural products, according to people in both countries briefed on the deal.
ZTE has been forced to halt major operations after the US slapped a ban on China’s second-largest maker of phone networking equipment for violating a settlement on breaching sanctions and then lying about it.
The potential settlement is the latest in a series of corporate developments for ZTE, which declared on May 10 that it would have to go out of business following a suspension of share trading the month before, when Washington imposed a seven-year moratorium on it sourcing US components.
The White House made a U-turn soon after, with Mr Trump tweeting on May 14 that he would work with Chinese President Xi Jinping to grant the company a reprieve.
Chinese officials and analysts do not accept the Trump administration’s argument that the sourcing ban, imposed in April by Wilbur Ross, the US commerce secretary, was a “legal enforcement matter” unrelated to the trade negotiations. “ZTE did not deserve the death penalty for its mistakes,” said Lu Xiang at the Chinese Academy of Social Sciences. “It was used as a tool in the trade dispute.”
Yesterday, US Treasury secretary Steven Mnuchin told CNBC that Mr Xi had requested that Mr Trump support ZTE — a request he said was no different than an American president lobbying on behalf of US companies. ZTE’s largest shareholder is a state-owned group linked to a contractor to China’s space and missile programmes.