On March 23, ZTE announced this morning that it plans to disclose major matters, so the trading will be temporarily suspended from the opening of the market on March 23, 2022. Then at noon today, ZTE released insider information and resumption announcement.

According to the announcement, ZTE received the judgment of the Federal District Court for the Northern District of Texas on March 22, 2022 local time, ruling that ZTE’s probation will not be revoked (that is, the probation will expire on March 22, 2022 local time) without any punishment, and confirmed that the term of office of the inspector will end on March 22, 2022 local time. This also means that the “seven-year observation period” of ZTE in the United States has finally ended.

Affected by this good news, on March 23, ZTE’s A-share rose by the limit at the opening of the afternoon trading, and the share price of Hong Kong stocks soared by 60% (based on the highest intraday price of HK $24.9).

On March 7, 2016, the United States accused ZTE of seriously violating its export restriction regulations and took export restriction measures against ZTE to prohibit American enterprises from selling its component products including chips, thus opening the sanctions against ZTE in the United States.

After the US Department of Commerce issued the ban, ZTE comprehensively evaluated the impact of the US sanctions on the company and actively communicated with all parties. On March 21, 2016, ZTE reached an interim agreement with the US Department of Commerce, and the US decided to temporarily lift the export restrictions on ZTE and its subsidiaries, which are valid from March 24 to the end of June of that year. As a condition, ZTE must remove senior management positions who have participated in violations. Since then, ZTE’s relations with the United States have eased.

In August 2016, the US Department of commerce again extended the temporary export period of ZTE; In November of the same year, the United States again postponed the implementation time of the export ban and decided to restrict the export of ZTE products in 2017.

In March 2017, the US Department of justice, the overseas asset management office of the Ministry of Finance and the Ministry of Commerce jointly decided to impose a fine of US $1.19 billion on ZTE. The amount of this fine has become the largest ever fine issued by the office of overseas assets control of the U.S. Department of the Treasury for non-financial institutions. At the same time, the United States gives ZTE a seven-year “observation period”. If ZTE no longer commits any violations within seven years (including 2016), the United States will lift its “ban”.

After a year of rectification, ZTE also publicly acknowledged the violation of the US export control ban and agreed to pay a fine of US $892 million to the United States, with another US $300 million suspended. So far, the US sanctions against ZTE have come to an end for the time being.

However, it was unexpected that less than a year later, the United States imposed sanctions on ZTE.

On April 16, 2018, the Bureau of industry and security (BIS) of the U.S. Department of Commerce made the decision to activate the refusal order against ZTE and ZTE KANGXUN on the grounds that ZTE failed to deduct the bonus and issue a disciplinary letter in time for some employees involved in historical export control violations, and made false statements in two letters submitted to the U.S. government on November 30, 2016 and July 20, 2017.

This made ZTE unable to purchase parts from American suppliers, and ZTE immediately fell into a shutdown. ZTE announced that affected by the refusal order, the company’s main business activities could not be carried out.

In order to protect the rights and interests of domestic communication enterprises in American development and help ZTE tide over the crisis, the Chinese government and the United States held many trade consultations on this incident.

On May 25, 2018, the US Department of Commerce submitted a notice to the US Congress to lift the sales ban on ZTE.

On June 7, 2018, the U.S. Department of Commerce announced that ZTE and its affiliates had agreed to pay fines and take compliance measures to replace the seven-year ban imposed by the U.S. Department of Commerce on the company’s purchase of parts from U.S. suppliers. To this end, ZTE needs to pay a fine of US $1 billion to the US government, allocate another US $400 million in escrow funds, and replace the management and board of directors within 30 days. However, if ZTE fails to fulfill the agreement or violates the agreement again, the United States will restart sanctions and confiscate the custody funds.

In addition, ZTE is also required to appoint an independent special compliance coordinator (hereinafter referred to as the “coordinator”) at its own expense within 30 days after the issuance of the order of June 8, 2018 by BIS. The coordinator will be responsible for coordinating, monitoring, evaluating and reporting on ZTE and its global subsidiaries or affiliates’ compliance with the U.S. export administration act of 1979, regulations, agreements and the order of June 8, 2018 during the monitoring period, And report equally to the president, board of directors and bis of ZTE.

On March 4, 2022, ZTE announced that it would participate in the hearing on the revocation of probation held on March 14. The hearing was related to a former employee of ZTE suspected of visa fraud, but ZTE said the employee had left the company long ago and ZTE was not charged in the visa case.

Seven years have passed since the United States first imposed sanctions on ZTE in March 2016, which also means that the seven-year “observation period” of ZTE in the United States has officially ended. With the US court ruling on the end of ZTE’s “Probation” without any punishment, it also means that the “sword of Damocles” hanging on ZTE’s head can finally be removed.