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Financial Times / Biz - Money

Trump orders U-turn over sanctions against Chinese telecom group

Donald Trump said he is working with the Chinese president to help restore the commercial fortunes of one of China’s largest telecoms equipment makers, in a stunning U-turn following his administration’s decision to ban the firm from sourcing vital components from US companies.

The US president wrote on Twitter that he has “instructed” the US commerce department to find ways to give ZTE Corp a way to “get back into business, fast” after talks with his Chinese counterpart, Xi Jinping.

The announcement marks an unusual direct intervention by the US president in what the administration previously portrayed as a legal and procedural rather than political case.

“I am speechless,” said Kevin Wolf, who oversaw the launch of the ZTE case as assistant secretary of commerce in the Obama administration. “I’m highly confident that a [US] president has never intervened in a law-enforcement matter like this before …It’s so outside the way the rules were set up.”

The US commerce department barred ZTE from purchasing components in the US for seven years after it was caught violating the terms of a $1.2bn settlement agreed last year in which ZTE admitted illegally selling equipment that included sensitive US parts to Iran and North Korea.

The move effectively put ZTE out of business and the Chinese telecommunications company announced last week that it was suspending operations.

US officials insisted when they announced the ban last month that it was not related to broader US-China trade tensions. The action, they said, had been taken only because ZTE had been caught giving bonuses to the very officials responsible for the elaborate scheme used to circumvent US export control rules and had lied to US authorities about it.

But during a meeting in Beijing earlier this month, Chinese officials raised a resolution to the ZTE case as one of their demands for a broader agreement on trade.

The move comes ahead of the expected visit to Washington this week of Liu He, Xi Jinping’s top economic adviser, for further trade talks. It also comes as many in the US business community are increasingly concerned the Trump administration is too focused on securing a quick deal with Beijing to reduce the US’s $337bn trade deficit with China at the cost of forcing more meaningful long-term changes.

The president’s intervention amounts to an important concession to China and was welcomed as such in Beijing.

“Welcome this decision. Whether or not ZTE had been punished as a card played by Washington in its trade war against China. President Trump’s latest decision is a good decision,” Hu Xijin, editor in chief of the Chinese state-owned Global Times, wrote on Twitter.

Even as Mr Trump pursues measures to help ZTE, White House officials including John Bolton, the national security adviser, are simultaneously warning European companies they could be hit by sanctions if they do any business with Iran. The White House has also touted tough sanctions on North Korea as a key instrument forcing the country’s leader Kim Jong Un to the negotiating table with Mr Trump.

ZTE last week suspended trading in its shares in Hong Kong and Shenzhen given the gravity of the US moves for the commercial future of a company that relies heavily on imported US chips and other components.

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