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Chinese phone maker ZTE saved from brink after deal with US

08 June 2018

The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE stay in business in exchange for paying an additional $1 billion in fines and agreeing to let USA regulators monitor its operations.

The deal allows ZTE to continue to do business in the USA while paying a $1 billion penalty for violating sanctions against Iran.

In April, the Chinese group was cut off from United States technology products for violating U.S. sanctions against North Korea and Iran - measures which threatened to put ZTE out of business. A Commerce Department spokesman said that "no definitive agreement has been signed by both parties".

ZTE has also been a big smartphone vendor in the US, with products sold by companies like AT&T (T), Verizon (VZ) and T-Mobile (TMUS). The ban also hurt American companies that supply ZTE.

"I assure you with 100 percent confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe", Republican U.S. Senator Marco Rubio tweeted with the hashtag #VeryBadDeal.

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Ross, speaking about the agreement on CNBC on Thursday, said he did not think the arrangement would have any effect on tariff talks with China.

In its place, Commerce has levied $1.4 billion in fines and penalties, required the replacement of the company's senior management and board, and will install compliance officers inside the company.

But early this year, the U.S. government discovered that ZTE had not followed through on its promise.

For the last month, Chinese smartphone giant ZTE has been largely shut down after the Trump administration banned USA firms from selling it technology.

United States companies provide an estimated 25 to 30 percent of components in ZTE's equipment, which includes smartphones and gear to build telecommunications networks. "It's unprecedented to have U.S. agents as monitors ..." Separately, Qualcomm is trying to get Chinese approval for its pending $44 billion acquisition of NXP Semiconductors NV.

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Now, ZTE has reportedly signed an agreement with the USA, but apparently the Commerce Department has not yet signed.

US intelligence agencies have concluded that ZTE poses a "significant" national security threat.

Senate Democratic Leader Chuck Schumer tweeted the "deal with ZTE proves the president just shoots blanks". The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal.

U.S. President Donald Trump arrives for a welcoming ceremony in Beijing, China, November 9, 2017. "The ZTE case was a thorn in the side for China ..." Oclaro got 18% of its business from ZTE a year ago, while 30% of Acacia's total revenue was from ZTE.

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Chinese phone maker ZTE saved from brink after deal with US