ZTE drops Communist Party chief to reverse US import ban

A demoted executive at ZTE has been replaced as Communist Party secretary at the firm, according to people familiar with the matter, the latest in a series of personnel changes as the Chinese telecommunications company seeks to persuade the US to lift an export ban that has forced it to shut down major operations.

Fan Qingfeng was an executive vice-president at ZTE from March 2008 until January 2017, after which he was listed as a lower-ranked senior vice-president, according to a review of the company’s annual reports. Between 2008 and 2010, Fan was in charge of logistics and oversaw sales between 2010 and 2012.

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China’s No. 2 telecommunications equipment maker has been crippled by a ban imposed in April on buying US components for seven years for breaking an agreement reached after it was caught illegally shipping goods to Iran and North Korea. The Trump administration may soon claim as much as US$1.7 billion in penalties from ZTE, as it looks to punish and tighten control over the Chinese telecommunications company before allowing it back into business, Reuters reported at the weekend, citing people familiar with the matter.

It is not clear whether Fan’s replacement as party secretary is linked to his executive roles overseeing sales or other functions. Fan Qingfeng could not be reached for comment. ZTE declined to comment.

Fan’s removal from the party secretary position follows the sidelining of Xu Huijun, an executive vice-president and ZTE’s chief technology officer, and Huang Dabin, who oversaw corporate operations, as well as Cheng Gang, who was replaced in March as chief compliance and legal officer.

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Under China’s company law, firms should set up Communist Party branches according to the requirements of the party charter, which demands grass-roots cells be set up – including in companies and schools – if there are at least three party members in an organisation.

The US Commerce Department imposed the export ban on ZTE after it was found to have breached the terms of a previous settlement, by paying full bonuses to employees who engaged in the illegal sales of equipment to Iran, failing to issue letters of reprimand to those employees, and then lying about it to US authorities. The ban cut off the firm’s access to important components that go into everything from smartphones to network equipment, forcing it shut major operations.

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The decision to replace Fan as party secretary was not made by the company as such appointments are decided by the party, according to one of the people familiar with the matter, who asked not to be named as the information is private.

Replacing Fan as party secretary is Tian Dongfang, a ZTE non-executive director, Bloomberg reported last Thursday, citing unnamed sources. Tian could not be reached for comment.