China Briefing | Xi Jinping’s ZTE concession to Donald Trump still haunts Chinese negotiators in US trade talks

Xi reportedly agreed last year to allow a compliance department of executives chosen by the US to be embedded into the company to monitor the flow of every transaction – and ZTE has to pay

For Washington, enforcement of any agreement is the key, but Beijing views the US demands as reminiscent of China’s historical humiliations at the hands of Western powers

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Donald Trump meets Xi Jinping last month at the G20 leaders’ summit in Osaka, Japan. Photo: Reuters

Published: 9:30am, 27 Jul 2019Updated: 4:37pm, 27 Jul 2019

In May last year, President Xi Jinping unexpectedly called his American counterpart Donald Trump to plead with him to ease up on crippling sanctions against ZTE Corporation, one of China’s largest telecoms equipment makers, which is accused of selling goods containing US parts to Iran and North Korea.

At the time, Chinese officials did not anticipate the phone call would produce significant complications for the subsequent trade talks with the United States.

In the preceding month, the Trump administration had imposed a seven-year ban on the Chinese firm buying American components, effectively sounding the death knell for ZTE, which has a workforce of 75,000.

As Trump related the story in an interview with Fox News, Xi had told him he wanted to save the jobs of these workers, many of whom were based in his home province of Shaanxi.

ZTE has a workforce of 75,000. Photo: EPA

Trump and Xi haggled over the phone and eventually agreed on a deal whereby in exchange for easing sanctions, ZTE would agree to pay a US$1.3 billion fine, undertake sweeping management changes, and, more importantly, hire American compliance executives to monitor the company from within.