Published: Wed, June 13, 2018
Worldwide | By Myra Stephens

ZTE stock plummets 40% after crippling USA ban

ZTE stock plummets 40% after crippling USA ban

The amendment also bans USA government agencies from buying or leasing equipment from ZTE and its Chinese rival, Huawei, and bars US loans to the companies.

The amendment will also ban government agencies from trading telecommunications equipment and services with Chinese telecom companies ZTE and Huawei, as well as from providing loans to or subsidizing either company, according to The Hill.

After it was exposed that ZTE violated US trade embargoes and directly lied to officials about the conduct, the Commerce Department banned USA exports to the company as punishment.

The president's deal with ZTE would have forced the company to pay a $1 billion penalty, reorganize its company and allow US compliance officers in exchange for being able to sell its products inside the U.S.

Senators in support of the original deal also think that it is unrealistic for USA officials to police ZTE's future actions, as the Chinese company could still conduct improper business even under a watchful eye.

Shares in ZTE fell 42 percent in Hong Kong on Tuesday, their first trading day after it agreed to the deal, in which it pays a $1 billion penalty to the U.S. government and replaces its top managers.

A separate monitor was appointed to a three-year term by a USA federal court in Texas last year.

ZTE has more than a dozen senior vice presidents, which is a level below executive vice president, said the company source who declined to be identified as they were not authorized to speak to the media.

On Tuesday an amendment was made to a Senate defence bill that would repeal the deal, which allowed ZTE to open again in exchange for paying a US$1 billion fine, changing its management and other promises. The coordinator will have a staff of at least six employees funded by ZTE. On Wednesday in Hong Kong, they nosedived 40% to their lowest level in more than a year. Its Shenzhen stock slid by the daily maximum of 10%.

During its trading halt, fund managers cut their valuations of ZTE shares, with some lowering valuations of its A-shares to 20.04 yuan per share, or a 36 per cent discount to the closing level on April 16.

The decision to lift the USA ban on ZTE has faced sharp criticism from United States politicians, including from some Republicans.

Jeffries said it expected ZTE to pay its penalty in a few days and resume operations next week. This issue has become one of the key problems in a trade war between the two countries. "Given their repeated violations of USA law, we can not trust them to respect USA national security, and so it's vital we hold them accountable and pass this amendment". North Korea is largely dependent on economic ties with China, where leaders had claimed that absent a ZTE deal, the telecom giant would collapse.

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