(Yicai Global) April 17 -- China stands ready to defend its companies after the United States banned Chinese telecoms equipment giant ZTE Corp. from purchasing components from American suppliers for seven years.
The Ministry of Commerce today urged the US to create a fair, just, and stable legal and policy environment for Chinese companies. “The MOC will closely track the case and is ready to take necessary measures to protect the legitimate rights and interests of Chinese companies,” a spokesperson said.
ZTE today suspended trading in its Shenzhen-listed shares after the US Department of Commerce yesterday prohibited domestic companies from selling to China’s second-largest telecoms equipment maker, cutting off more than a fifth of its suppliers. The DOC claims ZTE made false statements to the Bureau of Industry and Security in 2016 and 2017 by failing to take punitive measures against employees involved in the illegal export of US products to Iran in March 2016.
ZTE is aware of the export denial order and is “assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly,” it said in a statement.
The Shenzhen-based company depends on US suppliers for components. ZTE gets between 20 percent and 30 percent of its parts from the US and has long-term agreements with Microsoft Corp., Intel Corp. and IBM Corp, according to an analyst from China Merchants Securities. It has bought USD14 billion worth of chips and equipment from the US in recent years, creating 20,000 jobs, the analyst added.
ZTE has conducted extensive trade and investment cooperation with hundreds of US companies and contributed tens of thousands of jobs to the US economy, the commerce ministry’s spokesperson said.
Biggest Civil Penalty
ZTE agreed to combined civil and criminal penalties of USD1.2 billion on March 7 last year for shipping telecoms equipment to North Korea and Iran in violation of US laws. The civil penalty is the largest the US commerce and treasury departments have ever imposed, and the largest fine the US government ever levied in an export case, US law firm Thompson Hine LLP said on its website the next day.
The company also agreed to fire some senior staff and strip bonuses from 35 others, but did not make good on this obligation and made false statements to US authorities about its compliance, US technology news site BGR reported yesterday, and it was this that prompted the seven-year ban.
“Instead of reprimanding ZTE staff and senior management, ZTE rewarded them,” said US Secretary of Commerce Wilbur Ross. “This egregious behavior cannot be ignored.”
“China has consistently asked Chinese companies to comply with the laws and policies of host countries and manage their businesses in line with laws and regulations,” the commerce ministry’s spokesperson added.
Editor: Ben Armour