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Trade War

US clears way for ending ZTE ban

Bruised Chinese tech firm moves closer to restoring critical supply chain

The U.S. and ZTE have finalized an agreement to end a ban on technology exports to the Chinese tech firm.   © Reuters

WASHINGTON -- The U.S. and ZTE reached an agreement on Wednesday that will lift a technology ban on the telecommunications equipment maker once it deposits $400 million, ending a high-profile battle in the U.S.-China trade war.

Washington in April barred ZTE from doing business with American businesses for seven years, cutting the company off from key suppliers of components like semiconductors and bringing its smartphone manufacturing to a sudden halt.

The two sides reached a settlement on June 7, and on Wednesday struck a deal enabling ZTE to put $400 million into an escrow account, to be forfeited if it fails to uphold the terms of the settlement. ZTE will also pay a $1 billion fine, and has installed new management and accepted U.S.-appointed compliance monitors.

The U.S. said it imposed the ban over false statements ZTE made while settling a previous dispute involving violations of American sanctions on Iran and North Korea. But the action's primary significance has been as part of rising U.S.-China trade friction.

President Donald Trump said in mid-May that he was working with Chinese President Xi Jinping to help ZTE "get back into business, fast," suggesting that it was a bargaining chip in the trade negotiations with Beijing.

ZTE will be able to resume core operations when the export ban is lifted. But the company remains in critical condition. The reputational and financial blow of the ban, coupled with the hefty fine, has badly hurt its stock price.

The settlement has drawn opposition from U.S. lawmakers who view ZTE as a national security risk. The Senate has passed a bill that would reinstate sanctions on the company.

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