China’s ZTE will live, thanks to a deal with the United States government

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The deal will allow the company to restart operations after it pays a $1 billion fine and installs USA compliance officers to monitor its activity.

Reuters reported exclusively on Tuesday that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms.

The move eases a seven-year ban on ZTE buying American parts, which Commerce levied in April. A fine was imposed on ZTE and the company promised to reprimand the employees responsible for the violations, yet they only fired 4 senior employees and failed to discipline the other 35 responsible. Republican Senators Marco Rubio and Susan Collins are co-sponsors, as are Democrats Richard Blumenthal and Bill Nelson.

Mr. Trump appears to be using ZTE's punishment as a bargaining chip in negotiations with China, rather than a matter of law enforcement.

Under the deal, the Chinese giant will also have to change its entire board of directors and retain outside legal compliance specialists who will report to the Commerce Department for 10 years. This would allow the U.S. to quickly re-instate the ban if ZTE violates the terms of the 10 year agreement.

President Donald Trump has drawn criticism from members of Congress for trying to reach a deal to save ZTE and the jobs it provides to Chinese workers.

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USA companies such as Acacia and Lumentum had been barred from selling devices to ZTE, China's second-biggest telecom gear maker behind Huawei. The Chinese authorities' involvement, on the backdrop of ongoing trade negotiations with the US, have saved ZTE from almost-certain death. The two countries have threatened to impose tariffs on up to $200bn worth of each other's products in a dispute over China's tactics to supplant U.S. technological supremacy, including demands that United States companies hand over trade secrets in exchange for access to the Chinese market.

The Trump administration has complained about a range of Chinese industrial policies that it says disadvantages US companies, including compulsory licensing arrangements and rampant theft of trade secrets. "I hope it means something good to us, but we are really focused more on our individual application", Mollenkopf told a corporate governance conference in NY.

Senate Democratic Leader Chuck Schumer tweeted the "deal with ZTE proves the president just shoots blanks".

Several U.S. chipmakers, including Qualcomm and Intel, count ZTE as a customer.

United States officials say China last weekend offered to buy an additional $70 billion in U.S. goods to cut the trade deficit - on condition that Trump call off the planned tech-sector tariffs. "The ZTE case was a thorn in the side for China".

ZTE supplier Oclaro Inc rose nearly 1% while Acacia Communications Inc. was down 1.5%. Smaller makers of optical components, including Oclaro and Acacia, rely more heavily on ZTE's business.

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