Bid to Block Trump's Deal on ZTE Would Have Support, Rubio Says

(Bloomberg) -- A potential bill to prohibit ZTE Corp. and other Chinese telecommunications companies from operating in the U.S. would garner supermajority support in Congress, Republican Senator Marco Rubio said.

Rubio was responding to Trump's proposal to allow the networking gear and smartphone maker to remain in business after paying a $1.3 billion fine, changing its management and board, and providing “high-level security guarantees.” The president has suggested the deal is a favor to Chinese President Xi Jinping as the two nations hold talks to prevent a trade war. But a bill like the one the senator's proposing threatens to derail any agreement struck with Beijing.

“Most members of Congress have come to understand the threat China poses,” Rubio said on CBS's “Face the Nation” on Sunday when asked whether President Donald Trump would sign such a measure. “There's a growing commitment in Congress to do something about what China is trying to do to the United States. And this is a good place to start.”

The Florida senator, who criticized the deal in a May 25 tweet and appeared on two Sunday political shows, said he expects Congress would pursue a measure to block ZTE and companies such as Huawei Technologies Co. from operating in the U.S. He said their equipment could be used to help China spy on the U.S. and steal corporate secrets.

“None of these companies should be operating in this country,” Rubio said. “None of them. They are used for espionage.”

Shares in ZTE's suppliers gyrated in Asia on Monday. Hong Kong-listed MOBI Development Co., which gets an estimated 46 percent of its revenue from the Chinese company, was down as much as 5.3 percent at one point before bouncing back. In mainland China, Eoptolink Technology Inc. -- which gets more than 30 percent of its sales from ZTE -- and Zhong Fu Tong Group Co. were up more than 1 percent. ZTE's own stock has been suspended from trade in Shenzhen and Hong Kong since April.

Read more: ZTE Is Said to Face at Least $3 Billion in Losses From U.S. Ban

‘Used for Espionage'

Shenzhen, China-based ZTE depends on U.S. components, such as chips from Qualcomm Inc., to build its smartphones and networking gear. The ban, for breaching terms of a settlement over sanction-breaking sales to Iran, has all but mothballed China's second-largest telecoms gear maker and become entangled in a trade dispute between the world's two largest economies.

Rubio said he spoke with Trump on Friday night, and thinks that while the administration wants to punish ZTE for breaking U.S. sanctions, he sees a broader effort to stop the Chinese from stealing intellectual property and forcing U.S. companies to transfer their technology to do business in China.

“Putting it out of business, a company like ZTE, is the kind of significant consequence that China would respond to, to understand that we're serious,” Rubio said on ABC's “This Week.”

The Senate on May 24 released a defense policy bill containing a provision requiring Trump, before making any ZTE deal, to certify with Congress that the company hasn't violated U.S. law for the past year and is cooperating with U.S. investigations.

“If President Trump won't put our security before Chinese jobs, Congress will act on a bipartisan basis to stop him,” said Maryland Democratic Senator Chris Van Hollen, author of the Senate provision.

Separately, a measure easily passed the House that would ban government agencies from using technology made by ZTE and prohibit the Defense Department from renewing contracts with vendors that work with the Chinese company.

The measure also would apply to several other Chinese companies, including Hytera Communications Corp., Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co.

--With assistance from Ben Brody.

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Ros Krasny, Mark Niquette

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