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Economy

China hits back at US ban on ZTE

Spat over telecom equipment maker's activities ratchets up trade tensions

U.S. companies have been prohibited from purchasing equipment from Chinese telecom ZTE for seven years.   © Reuters

HONG KONG/TOKYO -- China on Thursday hit back at a decision by the U.S. to prohibit American companies from doing business with telecommunication equipment maker ZTE, further stoking tensions between the two countries, which are already locked in a series of trade disputes.

Gao Feng, a spokesman for China's Ministry of Commerce, told a news conference the restrictions on ZTE "will ultimately undermine the United States itself." Feng said the U.S. will lose tens of thousands of jobs and that hundreds of U.S. companies will be affected by the decision, according to China's state-run Xinhua News Agency.

Feng's remarks are the ministry's latest comments on the decision by its U.S. counterpart on Monday to slap ZTE with a seven-year ban on exports to the country. The U.S. Commerce Department said that ZTE made false statements to cover up how it had "paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand." 

The ban prompted ZTE to delay the release of its quarterly earnings on Wednesday, as the Chinese telecommunications equipment maker assessed the impact on its business. Reuters cited a senior U.S. Commerce Department official, who implied the ban is unlikely to be lifted, as "there is no provision currently for that to occur."

ZTE has not said how it will respond to the ban. Edison Lee, an analyst at Jefferies, said in a report that the most likely "tangible" gain that could be accepted by both sides is a reduction of the Chinese government's direct subsidies to the technology industry.

According to The Wall Street Journal, Feng also said on Thursday that a Chinese government review of U.S. chipmaker Qualcomm's $44 billion purchase of Dutch manufacturer NXP Semiconductors found "issues that are hard to resolve."

Citing people familiar with the matter, the journal report said the Commerce Ministry slowed its review of the deal in recent weeks after China and the U.S. began trading threats of a trade war earlier in April, to signal Beijing's displeasure with developments.

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