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US lifts ban on ZTE temporarily, may remove seven-year embargo soon
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The US government has partially lifted its ban on ZTE Corp, which had led to the suspension of the major operations of the telecom equipment maker for months. The temporary easing of the restrictions will be valid from July 2 to August 1. If ZTE will be in full compliance of the US requirements by August 1, the seven-year export ban on the company to source from its US suppliers may be permanently removed, according to Caixin,  a Beijing-based financial and business news media.

The US Commerce Department released an authorization letter on July 2 to allow ZTE to resume a portion of its business, which will only include maintenance and support services for its networking and smartphone products sold through contracts signed before the ban was imposed in mid-April. No new deal is allowed to be made by the embattled Chinese company yet.

The US House of Representatives passed its defense bill earlier this week in a sweeping 359-49 vote, reported the South China Morning Post. An amendment to the appropriations bill prohibits the US government from buying from ZTE and Huawei Technologies, citing national security concerns. The new move is widely seen as being intended to pardon ZTE from harsher penalties that may in effect put it out of business.

On April 15, the US Commerce Department announced to impose a seven-year ban on ZTE to punish the company’s violation of first the US sanctions on Iran and North Korea and then the terms of a settlement it had agreed to last year. The ban had brought the main business of the hi-tech powerhouse to a standstill within weeks by cutting off its supply chain.

To everyone’s surprise, during mid-May, US President Donald Trump tweeted he would work with Xi Jinping, his Chinese counterpart, to prevent the company which employs 75,000 people from being closed down. He then instructed the US Commerce Department to look into easing the penalties that prohibited the company from buying chips and technologies from American companies.

It’s reported by the US media that Republican lawmakers strongly opposed Trump’s intervention in the ZTE case with the Senate voting last month to reinstate tough penalties on the Chinese company which, along with Huawei Technologies, are deemed by many China hawks as a national security threat.

Then came White House’s argument with Republican Senators last week, during which Trump emphasized his ZTE deal with China was “part of a broader geopolitical negotiating strategy”.

In this backdrop, the bill the House passed which has excluded language prohibiting ZTE from sourcing in the US market for seven years, is interpreted as “striking a middle ground” between the positions the White House and the Senate have taken, the South China Morning Post reported, suggesting the new development also signals that Trump’s ZTE deal will survive eventually.

At a shareholders’ meeting on June 29, Zhao Xianming, the CEO of ZTE Corp, indicated that the ban had inflicted no big harm to the company’s R&D initiatives and once the it’s lifted, ZTE’s major operations could be resumed within short time.

“For (our) company, after two months and a half, our core competence remains, especially in the aspect of research and development,” he said, adding the company’s 5G development capabilities continue to be bolstered.

 


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