A ban on ZTE Corp.'s imports from the U.S. is estimated to result in at least 20 billion Chinese yuan of losses as clients opt out of deals and expenses continue to ramp up, Bloomberg News reported, citing people familiar with the matter.
The U.S. Commerce Department in April prohibited businesses and individuals in the U.S. from selling components to the Chinese telecommunication gear maker, accusing it of repeatedly making false statements and violating international sanctions. The company relies on U.S. components to build its smartphones and networking gear.
But ZTE is optimistic that a deal with the U.S. could be reached soon and plans to restart idled factories within hours once the ban is lifted, the sources said.
The ban drove away potential ZTE clients and prompted some to withdraw from agreed deals. The Chinese company is spending an estimated 80 million yuan to 100 million yuan for daily operations while the majority of its 75,000 staff remains idle, the sources said.
Earlier in the week, U.S. President Donald Trump raised the possibility of imposing a $1 billion fine and a major management revamp on ZTE amid reports that the U.S. and China had agreed on a "broad outline" of a deal to lift the ZTE ban. The world's two biggest economies are also engaged in trade talks to work out a deal.
"It became apparent that a lot of Republicans were unhappy at some of the concessions being reported particularly in respect of Chinese telecoms company ZTE, and were seeking to block them if they came about," Michael Hewson, chief market analyst at CMC Markets U.K., said in a note May 23.
As of May 22, US$1 was equivalent to 6.37 Chinese yuan.
