Chinese telecom equipment company ZTE may have to pay more than $1 billion to the United States to settle long-running foreign bribery allegations, according to people familiar with the matter. The case focuses on whether the company violated the Foreign Corrupt Practices Act (FCPA), a U.S. law that bans offering money or anything of value to foreign officials to win business. Sources say the U.S. Department of Justice has been investigating deals ZTE made in South America and other regions, and one source said the most recent act under review happened in 2018. Another source said possible charges include a criminal conspiracy to commit bribery.
One of the people familiar with the case said the payment could even rise to $2 billion or more, depending on what investigators believe the company gained from the contracts. The details of the settlement remain under discussion, and officials have not said when a final decision may be reached. Any agreement would also need approval from the Chinese government.
The news caused a sharp market reaction. ZTE’s Hong Kong-listed shares fell more than 12%, while its Shenzhen-listed shares dropped by their daily limit of 10%. In a statement to the Hong Kong stock exchange, ZTE said it is in ongoing communication with the Justice Department. The company said it continues to strengthen its compliance systems and maintains a zero-tolerance policy toward corruption. ZTE did not respond to requests for comment before publication. A Justice Department spokesperson also declined to comment.
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A spokesperson for the Chinese embassy in Washington, Liu Pengyu, said he did not know the details of the case but added that China requires its companies to follow local laws when operating abroad.
Past U.S. Penalties Add Pressure to the Case
The new investigation is complicated by a past agreement between ZTE and the U.S. Department of Commerce. In 2017, during the term of President Donald Trump, ZTE pleaded guilty to illegally exporting U.S. goods to Iran. The company paid an $892 million penalty and accepted compliance requirements. Then in 2018, the Commerce Department accused ZTE of making false statements about disciplining employees involved in the violations. As a result, the U.S. banned all exports from American suppliers to ZTE.
That move cut the company off from key technology such as chips, software, and components. The ban forced ZTE to halt major operations until it paid another $1 billion and reached a new agreement later that same year. The 2018 deal lasts for 10 years, and the Commerce Department is now reviewing whether the new bribery allegations break the terms of that agreement. The department said it does not comment on active enforcement matters or confirm ongoing investigations.
Global Scrutiny and Financial Risks
A large new settlement could weaken ZTE’s financial position. The company earned $1.16 billion in profit last year, so a penalty of similar size would have a significant impact. Without a resolution, the U.S. could reinstate the export ban, which would again cut ZTE off from important American suppliers, including those providing chips for its smartphones, servers, and network equipment.
ZTE has been linked to corruption investigations before. In 2015, Norway’s Government Pension Fund Global reported that ZTE was connected to alleged bribery cases in 18 countries, with active investigations in 10 of them between 1998 and 2014. These allegations involved payments ranging from several million to tens of millions of dollars to secure public contracts in places including Algeria, the Philippines, and Zambia.
The new U.S. investigation builds on years of global concerns about the company’s business practices, placing ZTE once again under intense international scrutiny.