ZTE appears to be back on life support after the US Senate tried to block President Donald Trump’s reprieve of the crippled Chinese telecom company.
Lawmakers in Washington voted to reinstate the ban that prevents the technology giant from buying US components and software after breaking an agreement for violating sanctions on Iran and North Korea.
While it is still unclear whether the decision will make it into law, as it has to be passed in the lower chamber of Congress, the House of Representatives, and then avoid a White House veto, the markets reacted instantly to the news.
In Hong Kong, ZTE shares tumbled 24% to HK$10.02 (US$1.28) in early trading, sinking to its lowest level in nearly two years, while in Shenzhen the stock plunged by the daily limit of 10%.
Since trading resumed last week, ZTE has lost 38% of its market value or more than US$7 billion.
On Monday night, the Senate voted 85-10 for the annual National Defense Authorization Act, throwing the state-backed company back into the center of a bilateral trade war and reigniting uncertainty about the outlook for its crucial supply chain.
But before it can become law, the bill must be reconciled with one already passed by the House of Representatives that does not include the amendment. Any compromise measure must then be passed by both chambers and signed into law by Trump.
In a joint statement, Republican Senators Marco Rubio and Tom Cotton, as well as Democrat Senators Chuck Schumer and Chris Van Hollen, said: “We’re heartened that both parties made it clear that protecting American jobs and national security must come first when making deals with countries like China, which has a history of having little regard for either.
“It is vital that our colleagues in the House keep this bipartisan provision in the bill as it heads towards a conference,” the statement added.
In April, ZTE was hit with a seven-year ban after it broke a deal to discipline executives who conspired to evade US sanctions on Iran and North Korea.
At Trump’s urging, the Shenzhen-based group and the US Commerce Department reached an agreement on June 7 to have the ban lifted after ZTE agreed to pay a $1.4 billion fine.
Last week, the company proposed a $10.7 billion refinancing plan in a move to rebuild its shattered business after it was forced to close down operations in May.
With more than 75,000 staff, the company operates in more than 160 countries, while its telecom equipment runs through the “digital backbone of a great swath of the developing world.”
The group provides services for 100 million users in India, 300 million users in Indonesia and 29 million users in Italy.
But the US ban has threatened to kill off ZTE since up to 30% of its components, such as semiconductors, come from US suppliers.