Chinese telecom equipment giant ZTE Corp is facing the possibility of paying more than $1 billion to the U.S. government to settle long-running allegations of foreign bribery, according to people familiar with the matter. The company has already paid about $2 billion in U.S. penalties in recent years, mainly for illegally sending American technology to Iran, and has been the subject of multiple corruption investigations across the world. The latest U.S. probe focuses on whether ZTE violated the Foreign Corrupt Practices Act by paying bribes to secure telecommunications contracts in South America and other regions. Investigators believe the most recent bribery-related activity dates back to 2018.
The Latest Developments
The U.S. Department of Justice has now moved forward with its investigation and is working on a potential settlement that could exceed $1 billion, with one source suggesting the total could even surpass $2 billion, depending on how much profit the company earned from allegedly corrupt deals. One person familiar with the case said potential charges under consideration include a criminal conspiracy to commit bribery. ZTE has not publicly commented, though in an August 2024 memo to staff, shareholders and partners, the company reiterated its “zero-tolerance” stance toward corruption and highlighted its internal compliance system. The Justice Department declined to comment on the active investigation.
Why It Matters
A penalty of this size would hit ZTE at a sensitive time. The company reported $1.16 billion in profit last year, meaning any fine along the scale being discussed could significantly pressure its financial position. But the more immediate threat for ZTE is the possibility that the U.S. Commerce Department could reinstate an export ban if the company is found to have violated a 2018 compliance agreement. That earlier ban effectively shut down ZTE’s major operations by cutting off access to U.S. technology, including Qualcomm chips and American-made components essential to its phones, servers, and network equipment. The ban was lifted only after direct intervention from then-President Donald Trump and an additional $1 billion payment by ZTE.
The case draws in a range of actors beyond ZTE and the U.S. agencies investigating it. Any settlement would require approval from the Chinese government, adding a geopolitical layer to what is already a sensitive legal dispute between Washington and one of China’s most important telecom companies. U.S. technology suppliers ranging from Qualcomm and Intel to software vendors are also closely watching the outcome, since a renewed export ban would cut them off from a significant customer. Meanwhile, telecom operators in developing markets that rely on ZTE’s equipment could face supply chain disruptions if the company encounters fresh restrictions.
Broader Context
ZTE has long been associated with corruption allegations worldwide. In 2015, Norway’s government pension fund said ZTE had been linked to bribery in 18 countries between 1998 and 2014, including investigations in Algeria, the Philippines and Zambia, involving alleged payments of millions of dollars to government officials. The U.S. has also targeted several other telecom companies for foreign bribery in recent years, underscoring how widespread such practices have been in the global industry.
What’s Next
It is still unclear when a settlement might be reached. Negotiations between ZTE and the U.S. government are ongoing, and the final terms will depend partly on Beijing’s approval. If the two sides fail to reach an agreement, the Biden administration or a future one could decide to reimpose the export ban under the terms of the 2018 agreement, a move that would once again threaten the company’s ability to operate. A large settlement, however, would allow ZTE to avoid that outcome but would leave the company facing years of financial and reputational recovery. Either way, the case is expected to become another flashpoint in the already strained technological relationship between the United States and China.
With information from Reuters.
