ZTE to Pay a Record Fine to Get Back in Business

The U.S. reached a deal to allow ZTE to get back in business after the Chinese telecommunications company pays a record fine and agrees to management changes, according to Bloomberg.

“We still retain the power to shut them down again,“ Commerce Secretary Wilbur Ross said in an interview on CNBC. He said the Commerce Department’s $1.4 billion fine, including $400 million in escrow, brings U.S. penalties between last year and this year to $2.3 billion. Under the deal, the ban is suspended for 10 years and can be activated by Commerce should the company commit additional violations during that period, the department said in a statement announcing the agreement.

In a memo to ZTE’s employees, Chairman Yin Yimin said the issue mirrored problems in the company’s management and compliance culture. “We should hold relevant people accountable and avoid similar issues in the future,“ he wrote. “After this issue is resolved, the company will restore operations swiftly and maintain credibility to fulfill its responsibilities.“

Ross said the U.S. will install its “own compliance people“ to monitor the company, and shareholders will bring in new management and board. “These collectively are the most severe penalty“ the U.S. has ever imposed on a company, Commerce said in its statement. ZTE’s deal with the U.S. will likely get it back into business late next week with its stock likely to resume trading in 2-3 weeks.

An agreement that allows the crippled company to reopen was seen as a key Chinese demand as the world’s two largest economies try to avoid a trade war that could undermine global growth. After a personal plea from Chinese President Xi Jinping to help the company get back into business, President Donald Trump said that the initial fine on ZTE would lead to “too many jobs in China lost“ and that he would direct his Commerce Secretary to “get it done.“ The U.S. also needs China’s help negotiating the denuclearization of North Korea ahead of a June 12 summit between Trump and North Korea’s Kim Jong Un.