The Chinese smartphone giant ZTE has completely replaced its corporate leadership, naming new people to be CEO, CTO, CFO, and several vice presidents. The new CEO of ZTE will be Xu Ziyang, a former head of ZTE’s German operations who has worked at the company for two decades.
The move comes a week after ZTE named a new board of directors.
That export ban was the culmination of a years-long conflict between ZTE and the US government over the company’s sale of US technology to Iran and North Korea in violation of US sanctions rules. The US negotiated a settlement deal with ZTE last year, but early this year the US government said that ZTE had failed to keep its promises under the deal.
In April, the US responded by banning US firms from exporting technology to ZTE. Because ZTE’s smartphone business is heavily dependent on Qualcomm chips, Google’s Android operating system, and other American-made technology, the export ban amounted to a corporate death sentence. ZTE suspended operations in May.
ZTE worked frantically to secure a new deal, and the US imposed relatively harsh terms—a $1 billion fine on top of the $890 million ZTE paid last year, another $400 million in escrow as a deterrent against further misconduct, and a total change in ZTE’s leadership. US export control officials argue that completely replacing ZTE’s leadership team will make it more likely that the company will respect US export control laws in the future.
In exchange, ZTE has gotten temporary relief from the export ban—securing permission earlier this week to import US-made technology through the end of July. Once ZTE has followed through with other elements of its deal with the US, it should be granted a longer-term reprieve from the export ban.
But critics have argued that even the harsher terms of this second deal let ZTE off too lightly. “The death penalty is an appropriate punishment for their behavior,” said Sen. Tom Cotton (R-Ark.) last month.
Cotton is part of a bipartisan group of US senators that attached legislation blocking the ZTE deal to a must-pass military funding bill. That legislation passed the House, but companion legislation from the House does not include the ZTE-related language. House and Senate negotiators must decide whether to include the language in the final bill before sending it to President Trump for his signature.
Critics have pointed out that, in May, the Chinese government loaned $500 million to “build an Indonesian theme park that will feature a Trump-branded golf course and hotels.” The same week, Trump tweeted that he was looking for a way to get ZTE back into business because the export ban had led to “too many jobs in China lost.”
In June, White House trade advisor Peter Navarro said that “the president did this as a personal favor to the president of China as a way of showing some goodwill for bigger efforts.”