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Chinese telecoms giant ZTE fears collapse

May 10, 2018

Will ZTE be the first major commercial casualty of the ongoing trade dispute between China and the US? The telecoms giant issued a bleak statement on Wednesday, saying it had ceased major operations as a US ban bites.

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Shanghai ZTE Corporation R&D Center
Image: picture-alliance/dpa/W. Lei

Chinese telecommunications company ZTE says "the major operating activities of the company have ceased" as a result of the US Commerce Department's ruling that US companies could no longer supply the multinational with components.

Last month, the US cut off the Chinese company with a seven-year ban following a ruling that ZTE had violated an agreement not to export to Iran and North Korea, two countries on a no-export list. The US move came amid increasingly worsening trade relations between Washington and Beijing.

The ban specifically came following US investigators' allegations that ZTE had made false statements regarding its own settlement of the case in March 2017 when the company pleaded guilty to the charges and was fined $1.2 billion.

A major telecommunications company that is one of the top smartphone makers in China, ZTE outlined the severity of its position to the Hong Kong stock exchange on Wednesday evening.

Read more: From the world's workshop to the world's tech hub: China's economic leap forward

"As a result of the denial order, the major operating activities of the company have ceased," the company said, adding that it had sufficient cash reserves and would continue to meet its commercial obligations.

China says its economy can withstand trade tariffs

ZTE depends on US-made chips and other parts to make its own products and it said in its filing that it is "actively communicating" with the US side "to facilitate the modification or reversal" of the ban and "forge a positive outcome".

Trade talks set to resume

In trade negotiations between the US and China last week, the Chinese government specifically raised the ZTE case in an illustration of its strategic importance to Beijing.

It asked the US to note its "high concern for the ZTE Corporation case, listen to ZTE's complaints seriously, and consider the company's progress in compliance construction and efforts to announce the adjustment of export injunction orders."

The US sanctions took the ongoing trade dispute with China firmly into the tech sector. Both countries have been targetting each others' products across multiple sectors, although talks between the countries are set to resume shortly.

ZTE, headquartered in the city of Shenzhen, has around 80,000 employees and last year recorded revenues of just over $17 billion.

aos/kd (AFP, Reuters)