April 17, 2018

Chinese telecom company ZTE suspends trading after being barred from US and UK

By Rachel Dobbs

ZTE, the Chinese telecoms equipment maker, has temporarily stopped trading in Hong Kong and Shenzhen after news that it was suspended from the UK and cut off from US suppliers

Yesterday, the UK’s cyber-defence watchdog (the National Cyber Security Centre) blacklisted the company, warning that ZTE’s equipment and services were a risk to national security.

ZTE, which is one of China’s leading state-owned countries, is also subject to a “denial of export privileges” by the US Department of Commerce’s Bureau of Industry and Security due to “repeated false statements to the US Government”. This prevents American businesses from selling components to ZTE.

ZTE was charged $1.2 billion in March 2017 after pleading guilty to violating US sanctions by illegally shipping telecommunications equipment to Iran and North Korea. The US government now claims that ZTE made false statements during settlement negotiations in 2016 and during its probationary period in 2017 and failed to discipline egregious employees.

Having suspended trading, ZTE said in a statement on its website:

ZTE is aware of the denial order activated by the United States Department of Commerce. At present, the company is assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly.

In Britain, the letter sent by the watchdog NCSC warned telecoms operators not to use ZTE equipment, which effectively locks the Chinese firm out of billions of pounds in contracts to upgrade British telecoms infrastructure.

BT formed a research and development partnership with ZTE in 2011 and has distributed ZTE modems. However, a spokeswoman from BT told the BBC that they had “a robust testing regime in place” to ensure its network is secure.

According to the¬†Financial Times, a letter from the NCSC stated that the UK telecoms network contains a large amount of equipment from Huawei, a privately-owned Chinese manufacturer. Adding ZTE equipment to the mix would “be an unacceptable national security risk to the UK telecoms infrastructure environment”.

Huawei’s equipment is currently monitored in Britain by GCHQ.

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