U.S. lifts ban on ZTE after $1.4B paid

A ZTE Corp. logo is displayed at a technical industry trade show in Shanghai in June. The removal of the U.S. ban on ZTE was a key demand of China as tension escalates between the countries.
A ZTE Corp. logo is displayed at a technical industry trade show in Shanghai in June. The removal of the U.S. ban on ZTE was a key demand of China as tension escalates between the countries.

The U.S. Commerce Department has lifted the ban on American firms selling products to China's ZTE Corp., removing the final hurdle for the company to start rebuilding its business.

The ban was removed after ZTE paid the final portion of a $1.4 billion penalty by placing $400 million in escrow at a U.S. bank, the department said in an emailed statement on Friday. That sum comes in addition to $892 million in penalties the telecommunications-equipment maker has paid to the U.S. government after pleading guilty for violating sanctions, it said.

Removing the ban on ZTE was a key Chinese government demand amid escalating tensions between the world's two largest economies. While those talks have stalled since the last high-level meeting in June, the United States and China have indicated their willingness to go back to the negotiating table. Neither is saying exactly what that would take.

The Trump administration in April announced a seven-year ban on U.S. exports to ZTE after it said the company violated sanctions agreements by selling American technology to Iran and North Korea. The move forced ZTE to announce it was shutting down.

Then President Donald Trump reversed course in May, saying he was reconsidering penalties on ZTE as personal favor to Chinese President Xi Jinping. Later that month, his administration announced it would allow the company to stay in business after paying a new fine, changing its management and providing "high-level security guarantees."

ZTE last month took a major step forward in meeting the White House's conditions by firing its entire board and appointing a new chairman. Its new management faces the challenge of rebuilding trust with phone companies and corporate customers. But the company is said to be facing at least $3 billion in total losses from a months-long moratorium that choked off the chips and other components needed to make its networking gear and smartphones.

A bipartisan group of U.S. lawmakers remains concerned about ZTE's threat to U.S. national security and is pushing for legislation aimed at restoring harsher penalties.

China's monthly trade surplus with the United States rose to a record in June and exports to the nation also soared, underlining the cause of an escalating trade war between the world's two largest economies.

The trade surplus with the United States was $28.97 billion, the highest in any month in data back to 1999. Exports climbed to $42.62 billion, also a high, the Chinese customs administration said on Friday.

While multiple factors will have influenced the data, including a rush by some manufacturers to sell goods before tariffs imposed this month hit, there's little sign that the U.S. deficit with China will improve any time soon. As tax cuts fuel the U.S. expansion and a slowing Chinese economy may cool domestic demand, the almost-$340 billion annual gap will continue to provide the backdrop to the standoff.

As the world's largest exporter, China continues to benefit from robust global demand, but the increase in tensions and trade barriers with the United States is weighing on the outlook. China and the United States imposed 25 percent tariffs on $34 billion of the others' imports July 6, and Beijing has vowed to fight back against proposed tariffs on an additional $200 billion in Chinese goods.

"The record bilateral surplus shows exactly that the U.S. economy is robust while that of China is weakening," said Wang Jian, a Shanghai-based economist at Shenwan Hongyuan Group Co. "China's domestic investment is softening due to funding strains, while consumption is not particularly strong either."

China's global trade surplus in June narrowed by 10.9 percent to $41.6 billion.

The surplus with the 28-nation European Union, the country's second-largest trading partner, expanded by 33.6 percent to $16.3 billion.

Meanwhile, the U.S. Commerce Department has asked carmakers to reveal some of their most closely held secrets as part of its investigation of whether tariffs on imported cars and components are needed to safeguard national security.

A 34-page questionnaire from the department's Bureau of Industry and Security was sent to several automakers this month seeking sensitive details about company finances, factories, supply chains and other topics.

"The breadth and depth of this request is invasive, requiring massive amounts of proprietary and confidential business data from global operations -- all under the pretense of national security," said Gloria Bergquist, spokesman for the Alliance of Automobile Manufacturers, which represents several carmakers who received the survey.

The alliance represents a dozen automakers including General Motors Co., Toyota Motor Corp. and Volkswagen AG.

The survey's cover page says recipients are required by law to respond to the survey, and those who don't could be sentenced to up to one year in prison and a $10,000 fine.

Information for this article was contributed by Jenny Leonard, Andrew Mayeda, Yinan Zhao, Xiaoqing Pi, Ryan Beene and Jenny Leonard of Bloomberg News and by Joe McDonald of The Associated Press.

Business on 07/14/2018

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