ZTE in talks with US govt over trade curbs

The export ban on the second-largest Chinese telecom equipment maker quickly unfolded into a diplomatic issue, with Foreign Minister Wang Yi saying the punishment "only hurts others and does not benefit oneself". US component makers rely heavily on Chinese enterprises such as ZTE, Huawei and Lenovo Group Ltd for sales.

But Nicole Peng, research director at research firm Canalys China, said the US may not back off on the case.

"The US Commerce Department will not easily lift the ban on ZTE in order to set an example for other companies," she said. "The uncertainty of the outcome is the factor that will do the most damage to ZTE's business."

Zhu Jinsong, an analyst at Shanghai-based Haitong Securities Co Ltd, said the export restrictions on ZTE will deeply affect the Chinese IT industry.

"The matter is out of ZTE's control. The restriction reflects a battle between the Chinese and US high-tech industries. Although US suppliers could ask for permission to sell products to ZTE, the US authorities will definitely deny such a request," according to Zhu.

Traded in Shenzhen and Hong Kong, ZTE stocks remained suspended as of Wednesday.