US Senate votes to reimpose ban on China's ZTE, shares plunge

US Senate votes to reimpose ban on China's ZTE, shares plunge

But in a blow to the Trump administration and its work with Chinese president Xi Jinping, the Senate has voted to amend the National Defense Authorization Act to reinstate sanctions on the company. The legislation was passed with 85-10 votes, marking one of a handful of times the Republican-controlled Senate has deviated from a Trump policy.

Under the Trump deal, ZTE would have to pay another $1 billion in fines for its sanctions violations in exchange for the United States dropping an earlier ban on its purchases of equipment from USA suppliers, which the company contended would put it out of business.

ZTE Corp. dived 27% after American lawmakers passed a bill to restore severe penalties on China's second-largest telecoms gear-maker, potentially up-ending a deal struck with President Donald Trump to allow it to get back in business. It's not clear at this point if the ZTE sanctions will be in the completed version. The House approved the bill without the ZTE language.

At Trump's urging, ZTE and the US Commerce Department reached an agreement on June 7 to have the ban lifted.

The US House of Representatives has already passed its own defence spending bill, which does not include anything about the trade ban.

Under the new provision, the administration would have to certify that ZTE and other Chinese telecoms haven't violated any law in the U.S. for a year and have been cooperating with authorities.

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In catch-up with the Hong Kong shares that have more than halved in price since trading resumed last Wednesday, ZTE's Shenzhen-listed shares declined by the maximum daily allowed 10 percent for the fifth consecutive day.

"We're heartened that both parties made it clear that protecting American jobs and national security must come first when making deals with countries like China, which has a history of having little regard for either", they wrote.

A spokesperson for Senator Tom Cotton of Arkansas, who was a sponsor of the amendment blocking out ZTE and Chinese telecommunications cohort Huawei, confirmed that the topic of ZTE was discussed, but did not specify any negotiation.

With around 30 percent of the components in ZTE products coming from United States businesses, including Qualcomm, Intel, and Microsoft, the ban led to it ceasing "major operating activities" one month later.

Notably, the House version of the bill doesn't include the amendments prohibiting ZTE from doing business in the USA, so it remains to be seen whether the final bill will have those provisions intact.

It could face a hard path to being included in the final NDAA, especially if Trump lobbies the Republican-led Congress against it, as he is expected to do.

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