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China, US nearing deal to lift ban on ZTE - report

US President Donald Trump's administration is working on details of a deal with China, and may lift a ban on US companies selling hardware and software to Chinese telecommunications firm ZTE if it works out, the Wall Street Journal reported late on Monday.

The details are still being worked out but would include major changes to management, the board and potentially significant fines, the newspaper said, citing unidentified people familiar with the matter. Larry Kudlow, Trump's top economic adviser, said on the weekend that similar measures would be needed before the US would consider a reprieve.

The move is part of a tentative deal between Washington and Beijing to settle tensions over ZTE after the US Commerce Department banned American businesses from selling to the Shenzhen-based firm for seven years.

That penalty was widely expected to bankrupt the telecommunications heavyweight, which pleaded guilty in March to illegally shipping US goods to Iran and North Korea in violation of American sanctions. The Shenzhen, China-based company, which employs about 75,000 people, depends on US components, such as chips from Qualcomm, to build its smartphones.

Last week, Trump posted a tweet saying that he was working with Chinese President Xi Jinping to help ZTE "get back into business, fast.'

The sources said that the deal could include China removing tariffs on imported US agricultural products, as well as buying more American farm goods, raising concerns that the White House is using the ZTE case as a bargaining chip in its ongoing trade discussions with Beijing.

The sources also said that the deal, while not yet cemented, was likely to be finalized before or during a planned trip by US Commerce Secretary Wilbur Ross to Beijing next week to help reach a broader trade pact to avert a trade war.

At a regular press conference on Tuesday, Chinese Foreign Ministry spokesperson Lu Kang said that the United States will send a high-level delegation to Beijing, where the two sides will talk about the details of the deal.

While US companies that sold products to ZTE would be relieved if a deal was reached, some in the US government as well as the business community have said they opposed what they saw as a clear-cut legal case being used as a bargaining chip in the broader trade conflict.

Chinese officials had made the issue a key focus of their demands during negotiations in Beijing earlier in May, threatening to halt talks on broader bilateral trade disputes unless Washington agreed to ease the sanctions, according to sources at the time.

Many experts have said that the case will push Beijing to double down on state support for strategic industries, an issue that remains at the heart of US-China trade friction.

"The release of hostage ZTE will be the start of China and the US to implement their trade agreements," Hu Xijin, editor in chief of Chinese state-backed Global Times tabloid, said on his Twitter account after news of the deal was reported.

On Saturday, the United States and China agreed to take measures to reduce the US trade deficit in goods by having China purchase more American goods particularly agriculture and energy products.


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