BEIJING — The United States will place export restrictions on Chinese telecoms giant ZTE for allegedly selling U.S. technology to Iran, Reuters has reported, causing trading in the company’s shares to be suspended in Hong Kong Monday.
The move, due to take effect Tuesday, may also further strain relations between Washington and Beijing in the information technology (IT) sphere, and could cause China to retaliate against U.S. companies, experts said.
The Commerce Department has been investigating ZTE since 2012 after Reuters reported it had signed contracts to ship millions of dollars of hardware and software from leading U.S. tech companies to Iran’s largest telecoms carrier, Telecommunication Co of Iran, and an associated firm.
Now, ZTE’s suppliers – anywhere in the world — will need to apply for an export license before selling U.S. equipment or parts to China’s largest telecoms equipment company. If they don’t, they could face punishment.
“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.
Samm Sacks, senior Asia analyst at the Eurasia Group, said the decision was a blow to Beijing’s ambitions to make Chinese companies global leaders in next generation IT, putting a “red flag” on the company at a time when it is the fourth-largest provider of smart phones to the U.S. market, and expanding in Europe.
In 2012, ZTE responded to the initial Reuters report by announcing it would “curtail” its business with Iran, not seek new customers and limit business with existing customers.
The company issued a statement late on Sunday saying it was “highly concerned” about the latest reports, insisting it had been cooperating with the U.S. investigation since 2012 “and is committed to fully address and resolve any concerns.”
Sacks said the move signals the Obama administration was not willing to back down over long-standing concerns over the issue, even at the expense of friction in the bilateral relationship with China.

Source: Washington Post, 7 March 2016