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ZTE Telecom giant halts share trading following US export ban

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Washington said ZTE had failed to follow through on pledges to punish staff responsible for illegal exports to Iran and North Korea.

ZTE has been banned from purchasing sensitive technology from the US over its illegal sales to Iran and North Korea play

ZTE has been banned from purchasing sensitive technology from the US over its illegal sales to Iran and North Korea

(AFP/File)

Chinese telecom giant ZTE halted trading of its shares in Hong Kong and Shenzhen Tuesday following a US ban on its purchase of sensitive technology, which drew a pledge by China to "safeguard" its companies if necessary.

Washington said ZTE had failed to follow through on pledges to punish staff responsible for illegal exports to Iran and North Korea.

But China's commerce ministry said the firm had created tens of thousands of American jobs.

The chairman of the Shenzhen-based firm, Yin Yimin, said ZTE had established a crisis team and was ready to "go to all lengths to face the crisis head-on".

"We are in a complicated international situation," Yin said in an open letter circulated online, warning that the company faces "twists and turns" abroad.

Following an investigation into the illegal sale of goods to Iran and North Korea, ZTE pleaded guilty in March 2017 to unlawful exports and was hit with $1.2 billion in fines, the largest criminal penalty in US history in an export control case.

But US Commerce Department investigators said it made additional false statements multiple times about having taken action against the employees responsible, when it had not.

In a statement on its website, the Chinese Ministry of Commerce said "China has always asked Chinese enterprises to abide by the host country's laws and policies and operate legally and properly in the process of overseas operation."

"ZTE has launched extensive trade and investment cooperation with hundreds of American businesses, and contributing tens of thousands of jobs to the United States," it added, saying that it was "ready to take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises."

The five-year US government investigation into ZTE's actions was first revealed in March 2016.

From January 2010 to March 2016, the company shipped $32 million of US cellular network equipment to Iran, and made 283 shipments of cellphones to North Korea, with the full knowledge of the highest levels of management, officials said.

ZTE used third-party companies to hide the export of US components to the sanctioned countries, and then hid the information by "sanitising databases" with information on the sales.

The firm deleted emails of employees involved in the scrubbing of records, and required employees with information about the illegal exports to sign non-disclosure agreements.

It also covered up the fact that ZTE paid full bonuses to employees who had engaged in illegal conduct, and failed to issue letters of reprimand.

Britain's National Cyber Security Centre (NCSC) also advised British telecommunication companies about the "potential risks" of using ZTE equipment.

"NCSC assess that the national security risks arising from the use of ZTE equipment or services within the context of the existing UK telecommunications infrastructure cannot be mitigated," said Ian Levy, its technical director, in a statement.

But a NCSC spokesman told AFP that the advice was not compulsory and that, legally speaking, British operators still have the right to use such equipment.

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