President Trump yesterday signed a defense funding bill that included a sweeping ban on the US government using technology supplied by Chinese telecommunications giants ZTE and Huawei. The bill also includes a narrower ban on using surveillance gear provided by Chinese companies Hytera Communications, Hangzhou Hikvision Digital Technology, or Dahua Technology for national security applications.
Obviously, being banned from selling to the US government is a significant blow to these companies. But overall the bill actually represents something of a reprieve for ZTE. Back in June, the US Senate passed a version of the bill that would have re-imposed an export ban that would have been a de facto death sentence for ZTE because ZTE is heavily dependent on components like Qualcomm chips and Google’s Android operating system.
The export ban took effect earlier this year after US officials caught ZTE selling technology to North Korea and Iran in violation of US sanctions. But President Trump became concerned that the deal would lead to “too many jobs in China lost,” so he had his administration negotiate a deal to lift the export ban. (A Trump-branded construction project in Indonesia got a $500 million loan from the Chinese government around the same time.) Under the deal, ZTE would pay a billion-dollar fine and replace its entire leadership team, and in exchange it would regain the ability to import US-made technology.
When the US Senate passed its defense funding bill in June, it included language blocking this deal and reinstating the ZTE export ban. But the House version of the bill did not include similar language, and negotiators dropped the language when they reconciled the two bills—avoiding a potentially awkward confrontation between Republican leaders in Congress and Trump.
So while ZTE will no longer be allowed to sell gear to the US government, ZTE officials are likely breathing a sigh of relief, since the Senate bill could have put ZTE out of business altogether.
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