ZTE/US deal meets criticism

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(FinancialPress) — The deal that chinese phonemaker ZTE and the Trump administration reached has not pleased everyone.

The state-controlled Chinese smartphone manufacturer had been banned from trading tech and services with American companies after it breached a 2017 agreement. The agreement in question was meant to have the company comply with sanctions imposed by the US on North Korea and Iran.

However, the ban will be lifted after hefty negotiations. ZTE has agreed to pay a $1 billion fine and to comply with the sanctions from here on out – as well as replace its entire board of directors and corporate leadership.

The deal has one more striking provision – an American-appointed oversight team will work on-site at the company to ensure their compliance. Chinese experts were taken aback by the point in question, and many are unsure about how such an agreement could move forward.

Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies said that it, to him, “seems like an aspirational goal. I can see this one getting dragged out.”

He expects Chinese officials to fight that part of the new deal, and also thinks that the US will prefer dropping the point over getting engaged in another lengthy round of negotiations over it.
American Enterprise Institute‘s resident scholar Derek Scissors says that even if the team was to be established on-site, that wouldn‘t stop the company from breaching the new agreement if they so preferred to.
He feels that Chinese officials could easily set up another company in order to break the sanctions away from ZTE. From his perspective, the compliance team “will accomplish nothing.”

The escrow in the room

Additionally, $400 million of ZTE money will be required to be in an escrow account. The money will be forfeited if further agreement breaches are detected, and the ban will be effective once more.

ZTE still has not emitted official comment on the deal yet.

 

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Ruben is a South American writer who focuses on the state of the cryptocurrency, cannabis and tech industries worldwide.

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