ZTE stock plummets more than 9% after US government tech purchase ban announcement

The company was brought to its knees last year when the US cut off its supplies.

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Chinese telecom giant ZTE, whose business was crippled by the US sanction last year, has seen its stock prices drop today after the US government unveiled a new interim rule that limits federal agencies from acquiring equipment from five Chinese companies.

As of midday, ZTE shares in Hong Kong observed a 9.17% drop since the market opening on Friday, while its Shanghai shares also registered a 7.08% dip.

The Shenzhen-based company, which is China’s second-largest telecom equipment maker after Huawei, will be affected by this de facto government procurement ban, effective from next Tuesday, along with Huawei, Hantera, Dahua, and Hikvision.

The US government procurement rule from the General Services Administration, the Department of Defense and NASA, will ban government agencies from purchasing telecom and video surveillance equipment from the five mentioned Chinese companies and their affiliates, or renewing contracts with them.

Responding to the stock price plunges, ZTE told Chinese media that all of its production and operation activities are developing normally.

The procurement ban came days after ZTE released China’s first 5G smartphone. ZTE also recently announced 25 new commercial 5G contracts globally, according to Nikkei Asia Review.

The company’s business was brought to a near-collapse last year after the US government issued a Denial Order banning US companies from doing business with ZTE. Although the Denial Order was lifted a few months later, the company saw its net profit falling by 252.9% and booked a loss of RMB 6.98 billion in 2018.