ZTE replaces 14 board members in compliance to US deal

(FinancialPress) — Chinese phone manufacturer ZTE has shuffled its entire board of directors. The move cones as part of the compliance guidelines to withdraw the trade ban set by the US government.

The move, made public on Friday through regulatory filings, moves ZTE closer to being able to purchase American goods and services once more.

A total of 14 board members stepped down from their roles, and will be replaced by 8 new ones elected by stockholders.

ZTE got slapped with a trade ban back in April. The US government made the decision after discovering that the Chinese company had been trading with Iran and North Korea despite a deal being in place since 2017, which restricted them from doing so.

Wilbur Ross, Commerce Secretary to Washington, announced in June that a deal had been reached to allow ZTE to purchase from American companies again – under strict conditions.

So far, ZTE has had to pay a $1 billion fine and to put another $400 million in an escrow account, as collateral in case they violate the terms of the new deal. The conditions were revealed by a Commerce Department official last week.

Deal meets skepticism

Resident American Enterprise Institute scholar Derek Scissors believes that the shuffle in management won‘t signify real change in the company. As a state-controlled endeavor, ZTE is ultimately directed by the Chinese government – not by its directors. And also, the latter themselves will be joined at the hip with the government.

“The controlling entity here is the Chinese state,” he said. “It’s not who’s on the board.”

Both Democrat and Republican congressmen have stated that ZTE is an ongoing threat to the United States‘ national security, and therefore should not get off so easy. ZTE is the second largest telecom equipment manufacturer in China.

The Senate passed an annual defense bill which included the undoing of President Trump‘s deal with the company. Trump, on the other hand, is using ZTE‘s survival as a bargaining chip to use in the broader game board of the ongoing trade dispute with the its government.

This will be the first week of tariff enactment on Chinese imported goods. It will affect trade flow to the tune of an estimated $34 billion.

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