The ban on sales by American companies to ZTE, China's largest-listed telecommunications equipment manufacturer, is punishment following the charges that the equipment maker allegedly made false statements during an investigation into sales of its equipment to Iran.
But instead of punishing those involved, "ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand", the Commerce Department said in a statement.
ZTE, the China-based hardware and smartphone maker, has been banned from procuring electronic components from American suppliers by the US Department of Commerce.
"If the issue can not be solved smoothly and immediately, we think that ZTE will face tremendous disaster and would be forced to scale back on its smartphone business, not only in the USA, but also in other markets", said Strategy Analytics analyst Woody Oh. (NYSE: T). According to a report from Reuters at the time, security concerns were raised during the negotiations between Huawei and AT&T.
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Washington has also deepened its scrutiny of Chinese investment in the US, with the Committee on Foreign Investment in the United States (CFIUS), blocking many proposed acquisitions of USA assets by Chinese companies.
Trading in ZTE shares was suspended in Hong Kong.
Having suffered a loss of 767.8 million Chinese yuan ($122 million) in 2016, ZTE bounced back with a net profit of more than RMB6.7 billion ($1.1 billion) past year, with sales up 7.5%, to RMB108.8 billion ($17.3 billion). In a separate move, the UK's National Cyber Security Centre (NCSC) has written to United Kingdom telecoms providers warning them that the use of ZTE's equipment and services could pose a national security risk.
The company has set up a crisis management group in response to the ban, said a ZTE source, declining to be identified as the information was confidential.
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The remark suggested increasing rapprochement with Israel, which like Riyadh , sees Tehran as its arch rival. The Arab League was founded in 1945 to protect newly-won independence throughout the region.
"China does not play by our rules, and we must be vigilant against Chinese threats to both our economic security and national security", said Republican Representative Robert Pittenger after the Commerce announcement.
President Donald Trump (L) shakes hands with Chinese President Xi Jinping during a state visit to Beijing in November 2017.
For ZTE itself, the latest USA action means one of the world's top makers of smartphones and communications gear will no longer be able to buy technology from American suppliers, including components central to its products. ZTE was a regular purchaser from Qualcomm Inc., Intel Corp., Acacia Communications and lumentum Holdings Inc. The official, speaking on the condition of anonymity, said the timing of the ZTE action was unfortunate because it could seem related to US steps to stop alleged theft of intellectual property.
American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes networking gear and smartphones.
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