On June 7, the U.S. Commerce Department announced that it has struck a deal with ZTE, one of China’s biggest telecommunications equipment manufacturers.
In exchange for the United States lifting its seven-year export ban on the company — an effective death sentence — ZTE has agreed to pay $1 billion in penalties together with an additional $400 million in escrow to cover any future violations. ZTE had been accused of violating U.S. sanctions on Iran and North Korea by selling technology to those countries.
“These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement,” the Department said.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Besides the tremendous penalties, ZTE will also have to “replace the entire board of directors and senior leadership” and “retain a team of special compliance coordinators selected by and answerable to” the Department for 10 years.
U.S. Secretary of Commerce Wilbur Ross said:
BIS [the Commerce Department’s Bureau of Industry and Security] is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures…We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. technology as well as collect the additional $400 million in escrow. The first settlement with ZTE set a record for civil and criminal penalties in an export control case. This new settlement agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.
Faced with such a record-breaking deal, China’s national media, contradictory to its earlier hard stance, took a softer tone. In fact, it places some rare blame on ZTE this time.
China Media Group, also known as Voice of China, China’s newly founded predominant state radio and television broadcaster, published a lengthy commentary soon after the U.S. announcement. It asserted that the “hard-won” deal was “worth cherishing and reflecting upon by all parties.”
Without elaboration, the commentary revealed that the negotiations over the ZTE case between China and the United States had experienced extremely “complicated and frightening” “ups and downs.” The commentary explained that Chinese government decided to “save ZTE from death line” with “herculean efforts” to assist all the Chinese people, “ZTE’s 80,000 employees” and “hundreds of thousands of Chinese workers along the industrial chain.”
Particularly, the commentary criticized ZTE in a harsh way rarely seen before. It referred to ZTE as a “giant infant” which “used its own business interest to coerce the government” into helping the company.
Straightforwardly pointing out that ZTE failed to honor the spirit of a contract and despised foreign laws, the article maintained that ZTE deserved all the consequences now.
Despite the fact that the Chinese government has helped ZTE out, “it doesn’t mean that Chinese companies can rely on the government whenever they have troubles,” the article warned.
This commentary has been widely reposted by Chinese media outlets, including Xinhua, China’s state news agency.
The apparently softened tone of China’s national media — scolding ZTE instead of the Trump administration — showed that the Chinese top authorities have made up their mind to settle the trade dispute with the United States, even if the costs will keep breaking records.