Chinese telecoms equipment group ZTE Corp said on Friday it expected to record a net loss in the first half of the year due to the hefty fine it agreed in order to lift a US ban on component supplies.
Republican and Democratic US senators said on Thursday they want the government to reinstate penalties on ZTE Corp, despite a Trump administration agreement paving the way for an end of a ban on the Chinese telecommunications company.
ZTE, which relies on USA components for its smart phones and networking gear, ceased major operations after the ban was ordered in April.
On Thursday, ZTE's Hong Kong shares surged some 25 percent after Reuters broke news the United States had signed an escrow agreement that paved the way for ZTE to deposit the $400 million.
Secretary of Commerce Wilbur Ross announced that ZTE has placed $400 million in escrow at a US bank. The new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period.
The $1 billion penalty was sent to the U.S. Treasury last month.
We also note that our nation's six top intelligence leaders testified before the Senate Intelligence Committee in February 2018 about their concern that ZTE, Huawei, and other Chinese state-directed telecommunications companies are beholden to the Chinese government and Communist Party, which provides the capacity for espionage and intellectual property theft, and therefore poses clear threats to the national security, people, and economy of the United States. He said ZTE buys parts from USA companies and that the deal was "also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi".
The United States has formally lifted a crippling ban on exports to China's ZTE, rescuing the smartphone maker from the brink of collapse after it was denied key components.
They pushed for the inclusion of legislation to reinstate the ZTE ban in the National Defense Authorization Act, or NDAA, a must-pass defence policy bill.
"As ZTE is finally near the end of the tunnel, we believe its current stock price incorporates an overly pessimistic view on the settlement". Its fate is unclear.