ZTE faces $3bn in losses from US technology ban

Bloomberg

ZTE Corp. is estimating losses of at least $3.1 billion from a US technology ban that’s halted major operations as clients pull out of deals and expenses mount, people familiar with the matter said.
The telecoms gear and smartphone maker however is hopeful of striking a deal soon and already has a plan in place — dubbed “T0” — to swing idled factories into action within hours once
Washington agrees to lift its seven-year moratorium on purchases of American chips and components, said the people, who asked not to be identified talking about private negotiations. The company declined to comment.
Shenzhen, China-based ZTE depends on US components, such as chips from Qualcomm Inc., to build its smartphones and networking gear.
The ban, for breaching terms of a settlement over sanction-breaking sales to Iran, has all but mothballed China’s second-largest telecoms gear maker and become entangled in a trade dispute between the world’s two largest economies.
President Donald Trump said he’s reconsidering US penalties as a favour to Chinese President Xi Jinping and may instead fine the company more than $1 billion. The US action has spooked potential clients during the crucial first-half IT spending season and even prompted some to renege on agreed deals, the people said. ZTE’s shelling out an estimated 80 million to 100 million yuan in daily operational expenses alone while most of its 75,000 employees sit idle, the people said.
But it’s hopeful of ramping up swiftly once a settlement is reached: thousands of workers biding their time in the company’s dormitories stand ready to flood its factories once a green light is given, the people said.
It’s unclear what ZTE can do to prompt a reprieve, though it’s expected to reshuffle executives and possibly its board. Chinese government officials however are undertaking negotiations on behalf of ZTE and the company, which doesn’t have much influence in the process, will have to accept the terms of any settlement reached between Beijing and Washington.
ZTE first ran into trouble in 2016 for violating laws restricting the sale of American technology to Iran.
An agreement in 2017 called for the company to pay as much as $1.2 billion and penalise the workers involved, in what was the largest criminal fine for the Justice Department in an export control or sanctions case.
But in April, the Commerce Department said ZTE instead paid full bonuses to employees who engaged in the illegal conduct, failed to issue letters of reprimand and lied about the practices to US authorities.

China may buy $90bn more US goods: Morgan Stanley
Bloomberg

China will buy an additional $60 billion to $90 billion worth of American goods over the next several years, with agricultural products poised to benefit in the near term followed by energy and ultimately non-high-tech manufactured products, according to Morgan Stanley.
The world’s largest trading nation will likely seek a “non-disruptive approach” to reducing its record trade surplus with the US by gradually increasing the share of additional goods imported from there, Hong Kong-based economists Robin Xing and Jenny Zheng wrote in a report this week. Other economists say China will have to divert imports from other nations.
China’s imports increased by $255 billion, or 16 percent, to $1.84 trillion last year, customs administration data show.
Incoming shipments from the US rose by $20 billion, accounting for less than 8 percent of the total gain.