Reprieve nears for ZTE

Top News | Agencies 16 May 2018

A deal is in the works for China to remove tariffs on US agricultural products, including soybeans, in return for a reprieve for ZTE from sanctions that prohibit US firms from selling components to the company.

"China is reportedly close to removing tariffs on agricultural products in exchange for relief for ZTE," said Stephen Innes, head of Asia-Pacific trade at Oanda. "It helps explain why President Donald Trump said he'd work with President Xi Jinping on this company."

Trump's tweet on Sunday that he was working with Xi to put ZTE "back into business, fast" after US sanctions threatened ZTE's existence and 70,000 Chinese jobs caught many trade-watchers by surprise.

"Too many jobs in China lost," Trump tweeted. "Commerce Department has been instructed to get it done!"

The overture came just as Vice Premier Liu He is flying to Washington for talks aimed at heading off a harmful battle between the world's two biggest economies and just before US companies plan to plead during three days of hearings for a resolution to the dispute.

The United States has proposed imposing tariffs on up to US$150 billion (HK$1.17 trillion) in Chinese products to punish Beijing for forcing American firms to hand over technology in exchange for access to markets. In retaliation, Beijing is threatening tariffs on US$50 billion in US products.

The United States also needs China's support as it prepares for talks with North Korea about abandoning nuclear weapons.

Commerce and ZTE last year settled charges that the Chinese company sold sensitive telecommunications equipment to Iran and North Korea in violation of US sanctions. ZTE agreed to plead guilty and pay about US$1 billion in fines.

Last month, Commerce accused ZTE of violating the deal and blocked it from importing US components for seven years.

The ban was tantamount to a death sentence for ZTE.

Last week, the company announced that it was halting operations.

Now, analysts see a potential deal. In return for Trump's lifeline to ZTE, Beijing might agree to buy more US products or take other steps to shrink the gaping US trade deficit with China - US$337 billion last year.

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