ZTE : 2019 THIRD QUARTERLY REPORT

October 28, 2019 at 03:47 pm IST

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

ZTE CORPORATION

中興通訊股份有限公司

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 763)

2019 THIRD QUARTERLY REPORT

This announcement is published simultaneously in the Mainland in accordance with the Rules Governing Listing of Stocks on The Shenzhen Stock Exchange and in Hong Kong in accordance with the disclosure obligations under Rule 13.09(2) and Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the inside information provisions set out in Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

§1 IMPORTANT

The Board of Directors, Supervisory Committee and the Directors, Supervisors and senior management of ZTE Corporation ("ZTE" or the "Company") confirm that there are no false information and misleading statements in this quarterly report nor any material omissions therefrom, and collectively and individually accept responsibility for the truthfulness, accuracy and completeness of its contents.
There are no Directors, Supervisors and senior management who do not warrant or who dispute the truthfulness, accuracy and completeness of the contents of this quarterly report.
This quarterly report was considered and approved at the Tenth Meeting of the Eighth Session of the Board of Directors of the Company.

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The financial statements contained in this quarterly report are unaudited. The financial information contained in this quarterly report has been prepared in accordance with PRC Accounting Standards for Business Enterprises ("PRC ASBEs").
Mr. Li Zixue, Chairman of the Company, Ms. Li Ying, Chief Financial Officer of the Company and Mr. Xu Jianrui, Head of Finance Division of the Company, hereby declare that they warrant the truthfulness, accuracy and completeness of the financial statements contained in this quarterly report.
China Securities Journal, Securities Times, Shanghai Securities News and http://www.cninfo.com.cn are designated media for the Company's information disclosure. Investors are advised to be aware of the investment risks involved.

§2 CORPORATE INFORMATION

2.1 Major accounting data and financial indicators

2.1.1 Major Accounting Data and Financial Indicators of the Company and its subsidiaries (the "Group")

			Change as at
			the end of the
	As at the end of the	As at the end of	reporting period
	reporting period	last year	compared with the
Item	(30 September 2019)	(31 December 2018)	end of last year

Total assets
(RMB in thousands)	147,159,353	129,350,749	13.77%
Owners' equity
attributable to holders of
ordinary shares of the
listed company
(RMB in thousands)	27,766,072	22,897,576	21.26%
Total share capital
(thousand shares) Note 1	4,225,959	4,192,672	0.79%
Net assets per share
attributable to holders of
ordinary shares of the
listed company
(RMB/share)	6.57	5.46	20.33%

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	Three		Nine
	months ended	Change compared	months ended	Change compared
	30 September	with the same	30 September	with the same
Item	2019	period last year	2019	period last year

Operating revenue (RMB in thousands)	19,631,479	1.55%	64,240,698	9.32%
Net profit attributable to holders of
ordinary shares of the listed company
(RMB in thousands)	2,657,151	370.74%	4,127,850	156.86%
Net profit after extraordinary items
attributable to holders of ordinary
shares of the listed company
(RMB in thousands)	98,032	(18.61%)	710,170	131.44%
Net cash flows from operating activities
(RMB in thousands)	1,638,608	131.65%	2,905,228	128.42%
Net cash flows from operating activities
per share (RMB/share)	0.39	131.71%	0.69	128.28%
Basic earnings per share
(RMB/share) Note 2	0.63	350.00%	0.98	156.65%
Diluted earnings per share
(RMB/share) Note 3	0.63	350.00%	0.98	156.65%
		Increased by 7.61		Increased by 43.52
Weighted average return on net assets (%)	10.10%	percentage points	16.30%	percentage points
Weighted average return on net assets		Decreased by 0.34		Increased by 11.27
after extraordinary items (%)	0.22%	percentage point	2.80%	percentage points

Note 1: The total share capital of the Company had increased from 4,192,671,843 shares to 4,225,958,707 shares following the exercise of 33,286,864 A share options by participants under the 2017 Share Option Incentive Scheme during the reporting period;

Note 2: Basic earnings per share for the nine months ended 30 September 2019, three months ended 30 September 2019, nine months ended 30 September 2018 and three months ended 30 September 2018 have been calculated on the basis of the weighted average number of ordinary shares in issue as at the end of the respective periods;

Note 3: As the 2017 share options granted by the Company have given rise to 19,140,000 and 0 potentially dilutive ordinary shares for the nine months ended 30 September 2019 and nine months ended 30 September 2018, respectively, dilutive earnings per share for the nine months and three months ended 30 September 2019 and the same periods last year have been calculated on the basis of basic earnings per share taking into account the said factor.

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Extraordinary item

Unit: RMB in thousands

	Amount
	Three	Nine
	months ended	months ended
	30 September	30 September
Extraordinary item	2019		2019

Non-operating income, other income and others	659,241		1,750,400
Gains/(Losses) from fair value change	(363,558)	(392,130)
Investment income	58,525		198,679
Add: Gains on disposal of non-current assets	2,679,902		2,662,927
Less: Other non-operating expenses	22,930		185,995
Less: Effect of income tax	451,677		605,082
Less: Effect of non-controlling interests (after tax)	384		11,119

Total	2,559,119		3,417,680

2.1.2 The amounts of net profit and shareholders' equity of the Group for the nine months ended 30 September 2019 and as at 30 September 2019 calculated in accordance with PRC ASBEs are fully consistent with those calculated under Hong Kong Financial Reporting Standards.

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2.2 Total number of shareholders and shareholdings of top 10 shareholders and top 10 holders of shares that were not subject to lock-up of the Company as at the end of the reporting period

Total number of shareholders

As at 30 September 2019 There were 356,796 shareholders in total (comprising 356,477 holders of A shares and 319 holders of H shares).

Shareholdings of top 10 shareholders or shareholders holding 5% or above

				Number of shares as
				at the end of the	Number of shares	Number of
			Percentage of	reporting period	held subject to	shares pledged
Name of shareholders	Nature of shareholders	shareholdings	(shares)	lock-up (shares)	or frozen

1.	Zhongxingxin Telecom Company Limited	Domestic general	27.19%	1,148,849,600	-	98,667,983
	("Zhongxingxin")	corporation			-
2.	HKSCC Nominees Limited Note 1	Foreign shareholder	17.85%	754,365,584	Unknown
3.	Central Huijin Asset Management Co. Ltd.	State-owned corporation	1.24%	52,519,600	-	Nil
4.	Hong Kong Securities Clearing Company	Overseas corporation	0.99%	41,713,722	-	Nil
	Limited Note 2				-
5.	Hunan Nantian (Group) Co., Ltd	State-owned corporation	0.98%	41,516,065	Nil
6.	China Life Insurance Company Limited	Other	0.72%	30,473,232	-	Nil
	- Dividend - Personal Dividend
	- 005L-FH002 Shen				-
7.	Shanghai Gaoyi Asset Management	Other	0.71%	30,000,000	Nil
	Partnership (Limited Partnership)
	- Gaoyi Linshan No. 1 Yuanwang Fund				-
8.	NSSF Portfolio #108	Other	0.70%	29,600,056	Nil
9.	NSSF Portfolio #112	Other	0.57%	24,288,515	-	Nil
10.	NSSF Portfolio #101	Other	0.54%	22,630,054	-	Nil

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Shareholdings of top 10 holders of shares not subject to lock-up

				Number of shares
				held not subject to
Name of shareholders			lock-up (shares)	Class of shares

1.	Zhongxingxin			1,146,811,600	A share
				2,038,000	H share
2.	HKSCC Nominees Limited			754,365,584	H share
3.	Central Huijin Asset Management Co. Ltd.		52,519,600	A share
4.	Hong Kong Securities Clearing Company Limited	41,713,722	A share
5.	Hunan Nantian (Group) Co., Ltd			41,516,065	A share
6.	China Life Insurance Company Limited - Dividend - Personal	30,473,232	A share
	Dividend - 005L-FH002 Shen
7.	Shanghai Gaoyi Asset Management Partnership (Limited	30,000,000	A share
	Partnership) - Gaoyi Linshan No. 1 Yuanwang Fund
8.	NSSF Portfolio #108			29,600,056	A share
9.	NSSF Portfolio #112			24,288,515	A share
10.	NSSF Portfolio #101			22,630,054	A share

Descriptions of any connected party	1.	Zhongxingxin was neither a connected party nor a concerted
relationships or concerted party		party of any of the top 10 shareholders and top 10 holders
relationships among the above		of shares that were not subject to lock-up set out in the
shareholders		table above.
		2.	Save for the above, the Company is not aware of any
			connected party relationships or concerted party
			relationships among the top 10 shareholders and the top 10
			holders of shares that were not subject to lock-up.

Description of top 10 shareholders'	N/A
involvement in financing and securities
lending businesses (if any)

Note 1: Shares held by HKSCC Nominees Limited represented the sum of shares held in the accounts of the H shareholders of the Company traded on the trading platform of HKSCC Nominees Limited.

Note 2: Shares held by Hong Kong Securities Clearing Company Limited represented the sum of A shares in the Company purchased through Shenzhen Hong Kong Stock Connect (Northbound).

Whether top 10 shareholders and top 10 holders of shares that were not subject to lock-up of the Company conducted any transactions on agreed repurchases during the reporting period

Yes √ No

The Company had no preferential shares.

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§3 MATERIAL MATTERS

3.1 Substantial changes in major accounting items and financial indicators of the Company and the reasons thereof

					Unit: RMB in thousands
Balance sheet

		30 September	31 December
	Item	2019	2018	Change	Analysis of reasons for changes

	Cash	32,746,991	24,289,798	34.82%	Reflecting mainly the increase in the size of
					financing and improvements to operating
					cashflow for the period.
	Trading financial	728,303	1,476,823	(50.68%)	Reflecting mainly the redemption of investment
	assets				products by subsidiary partnership funds of
					Shenzhen ZTE Capital Management
					Company Limited ("ZTE Capital") for the
					period.
	Derivative financial	84,541	228,117	(62.94%)	Reflecting mainly the decrease in gain on end-
	assets				of-periodfair-valuere-measurement of
					certain derivative investments for the period.
	Other receivables	1,397,696	2,004,870	(30.28%)	Reflecting mainly to amounts received for the
					disposal of equity interests in Whale Cloud
					Technology Co., Ltd. ("Whale Cloud") for
					the period.
	Contract assets	11,132,779	8,462,226	31.56% Reflecting mainly the non-fulfillment of
					conditions for collection of contract
					amounts for certain construction contracts
					for the period.
	Other current assets	8,034,783	5,848,369	37.39%	Reflecting mainly the increase in deductible
					input tax for the period.
	Long-term receivables	1,965,048	843,429	132.98%	Reflecting mainly the recognition by the
					Company of the consideration for the
					operating rights for entrusted operating
					properties as described in the "UPDATE
					ON DISCLOSEABLE TRANSACTION
					SUPPLEMENTAL AGREEMENT TO THE
					FRAMEWORK AGREEMENT FOR
					ENTRUSTMENT OF DEVELOPMENT,
					C O N S T R U C T I O N , S A L E S A N D
					OPERATION" published on 11 July 2019.
	Construction in	1,939,434	1,296,044	49.64% Reflecting mainly the increase in investment in
	progress				phase one of the intelligent manufacturing
					base in Nanjing for the period.

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	30 September	31 December
Item	2019	2018	Change	Analysis of reasons for changes

Other non-current	6,228,264	4,238,881	46.93%	Reflecting mainly the recognition by the
assets				Company of the future delivery of
				properties as described in the "UPDATE
				ON DISCLOSEABLE TRANSACTION
				SUPPLEMENTAL AGREEMENT TO THE
				FRAMEWORK AGREEMENT FOR
				ENTRUSTMENT OF DEVELOPMENT,
				C O N S T R U C T I O N , S A L E S A N D
				OPERATION" published on 11 July 2019.
Derivative financial	337,917	101,332	233.48% Reflecting mainly the increase in loss on end-
liabilities				of-periodfair-valuere-measurement of
				certain derivative investments for the period.
Other payables	5,377,326	11,135,030	(51.71%) Reflecting mainly the refund of joint venture
				amounts to Shenzhen Investment Holdings
				Co., Ltd. ("SIHC") for the period and
				write-off of certain transaction amounts with
				Vanke as described in the "UPDATE ON
				DISCLOSEABLE TRANSACTION
				SUPPLEMENTAL AGREEMENT TO THE
				FRAMEWORK AGREEMENT FOR
				ENTRUSTMENT OF DEVELOPMENT,
				C O N S T R U C T I O N , S A L E S A N D
				OPERATION" published on 11 July 2019.
Non-current liabilities	751,685	1,243,709	(39.56%) Reflecting mainly the decrease in long-term
due within one year				borrowing due within one year for the
				period.
Long-term loans	8,507,003	2,366,568	259.47%	Reflecting mainly the increase in working
				capital for the period.
Deferred income	3,530,558	1,953,057	80.77%	Reflecting mainly the increase in deferred
				income received for the period.

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Income Statement (Nine months ended 30 September)

	Nine months	Nine months
	ended	ended
	30 September	30 September
Item	2019	2018	Change	Analysis of reasons for changes

Taxes and surcharges	728,483	486,762	49.66%	Reflecting mainly the increase in city
				construction tax and education surcharge for
				the period.
Administrative	3,520,527	1,903,312	84.97%	Reflecting mainly the increase in legal expenses
expenses				for the period.
Finance costs	540,134	(308,966)	274.82%	Reflecting mainly the increase in interest
				expenses and the decrease in exchange gains
				for the period.
Investment income	618,839	(417,854)	248.10%	Reflecting mainly the increase in gain from the
				disposal of listed equity by subsidiary
				partnership funds of ZTE Capital for the
				period.
Gains/(Losses) from	(423,856)	(759,435)	44.19%	Reflecting mainly the combined effect of gain
changes in fair				on market price movements of listed equity
values				held by subsidiary partnership funds of ZTE
				Capital for the period versus loss for the
				same period last year and the transfer to
				investment income of cumulative fair-value
				change for previous periods upon disposal of
				certain listed equity for the period.
Gain from asset	2,687,413	-	N/A	Reflecting mainly the recognition by the
disposal				Company of relevant income as described in
				the "UPDATE ON DISCLOSEABLE
				TRANSACTION SUPPLEMENTAL
				AGREEMENT TO THE FRAMEWORK
				AGREEMENT FOR ENTRUSTMENT OF
				DEVELOPMENT, CONSTRUCTION,
				SALES AND OPERATION" published on
				11 July 2019.
Non-operating income	143,581	98,800	45.32%	Reflecting mainly the increase in income from
				suppliers' default indemnity, income from
				insurance claims and other certain non-
				operating income for the period.
Non-operating	210,480	6,964,719	(96.98%) Reflecting mainly the provision for the same
expenses				period last year of the USD1 billion penalty
				described in the "INSIDE INFORMATION
				ANNOUNCEMENT AND RESUMPTION
				OF TRADING" published by the Company
				on 12 June 2018.
Income tax	998,172	(236,391)	522.25%	Reflecting mainly profit for the period versus
				loss for the same period last year.
Non-controlling	429,361	(372,447)	215.28%	Reflecting mainly the profit recorded by certain
interests				subsidiaries for the period versus loss for the
				same period last year.

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	Nine months	Nine months
	ended	ended
	30 September	30 September
Item	2019	2018	Change	Analysis of reasons for changes

Exchange differences	46,582	(791,926)	105.88%	Reflecting mainly gain on translation of foreign
on translation of				operations due to exchange rate volatility
foreign operations				for the period versus loss on translation for
				the same period last year registered by the
				Group.
Other comprehensive	18,221	(21,111)	186.31%	Reflecting mainly gain on translation of foreign
income attributable				operations due to exchange rate volatility
to non-controlling				for the period versus loss on translation for
interests, net of tax				the same period last year registered by
				subsidiaries.

Income Statement (Three months ended 30 September)

	Three months	Three months
	ended	ended
	30 September	30 September
Item	2019	2018	Change	Analysis of reasons for changes

Administrative	982,019	543,965	80.53%	Reflecting mainly the increase in legal expenses
expenses				for the period.
Finance costs	(122,675)	(392,979)	68.78%	Reflecting mainly the decrease in exchange
				gains on exchange rate volatility for the
				period.
Investment income	303,442	(299,814)	201.21%	Reflecting mainly the increase in gain from the
				disposal of listed equity by subsidiary
				partnership funds of ZTE Capital for the
				period.
Credit impairment	(699,022)	(270,129)	158.77%	Reflecting mainly the increase in bad debt
losses				provision for trade receivables for the
				period.
Impairment losses	(711,253)	(109,839)	547.54%	Reflecting mainly the increase in provision for
				inventory impairment for the period.
Gain from asset	2,687,413	-	N/A	Reflecting mainly the recognition by the
disposal				Company of relevant income as described in
				the "UPDATE ON DISCLOSEABLE
				TRANSACTION SUPPLEMENTAL
				AGREEMENT TO THE FRAMEWORK
				AGREEMENT FOR ENTRUSTMENT OF
				DEVELOPMENT, CONSTRUCTION,
				SALES AND OPERATION" published on
				11 July 2019.
Non-operating income	69,273	25,737	169.16%	Reflecting mainly the increase in income from
				insurance claims and other certain non-
				operating income for the period.
Non-operating	30,440	211,290	(85.59%) Reflecting mainly the decrease in patent
expenses				litigation expenses for the period.

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		Three months	Three months
		ended	ended
		30 September	30 September
	Item	2019	2018	Change	Analysis of reasons for changes

	Income tax	585,258	328,642	78.08%	Reflecting mainly the increase in profit for the
					period.
	Non-controlling	248,364	(120,909)	305.41%	Reflecting mainly the profit recorded by certain
	interests				subsidiaries for the period versus loss for the
					same period last year.
	Exchange differences	(5,247)	2,465	(312.86%)	Reflecting mainly loss on translation of foreign
	on translation of				operations due to exchange rate volatility
	foreign operations				for the period versus gain on translation for
					the same period last year registered by the
					Group.
	Other comprehensive	18,973	-	N/A	Reflecting mainly gain on translation of foreign
	income attributable				operations due to exchange rate volatility
	to non-controlling				registered by subsidiaries for the period.
	interests, net of tax

Cash Flow Statement

		Nine months	Nine months
		ended	ended
		30 September	30 September
	Item	2019	2018	Change	Analysis of reasons for changes

	Net cash flows from	2,905,228	(10,222,894)	128.42%	Reflecting mainly payment of the USD1 billion
	operating activities				penalty and the suspended additional
					USD400 million penalty described in the
					" I N S I D E I N F O R M A T I O N
					ANNOUNCEMENT AND RESUMPTION
					OF TRADING" published by the Company
					on 12 June 2018 for the same period last
					year.
	Net cash flows from	(3,345,409)	(2,370,357)	(41.14%) Reflecting mainly the refund of joint venture
	investing activities				amounts to SIHC during the period.
	Net cash flows from	8,697,661	(5,046,449)	272.35%	Reflecting mainly the increase in cash received
	financing activities				from borrowings for the period.
	Effect of changes in	373,420	(151,794)	346.00%	Reflecting mainly exchange gain due to
	foreign exchange				exchange rate volatility for the period versus
	rate on cash and				exchange loss due to exchange rate volatility
	cash equivalents				for the same period last year.

- 11 -

3.2 Progress of significant events and analysis of their impacts and solutions

Appropriation of non-operating capital of the listed company by the controlling shareholder and its connected parties of the company and provision of third-party guarantees by the Company in violation of stipulated procedures
- Applicable √ N/A
Others

3.2.2.1 Matters pertaining to the Shenzhen Bay Super Headquarters Base

The Company won a bid for the land use rights of Site No. T208-0049 in the Shenzhen Bay Super Headquarters Base, Nanshan District, Shenzhen on 27 June 2017. For details, please refer to the "DISCLOSEABLE TRANSACTION ACQUISITION OF LAND USE RIGHTS IN SHENZHEN" published by the Company on 27 June 2017.

In connection with matters pertaining to the development, construction, sales and

operational services in respect of land site No. T208-0049 (the "Project"), the Company and Shenzhen Vanke Real Estate Co., Ltd. (深圳市萬科房地產有限公司) (now renamed Shenzhen Vanke Development Co., Ltd. (深圳市萬科發展有限公司)

("Vanke") entered into a Letter of Intent on 25 December 2017 and the "Framework Agreement for Entrustment of Development, Construction, Sale and Operation", "Contract for Entrustment of Development, Construction and Sale" and "Contract for Entrustment of Operation" on 9 February 2018.

For details of the above, please refer to the "Overseas Regulatory Announcement Announcement on the Signing of Letter of Intent with Shenzhen Vanke Real Estate Co., Ltd.", "Overseas Regulatory Announcement Announcement Updates on the Signing of Letter of Intent with Shenzhen Vanke Real Estate Co., Ltd." and

"DISCLOSEABLE TRANSACTION FRAMEWORK AGREEMENT FOR ENTRUSTMENT OF DEVELOPMENT, CONSTRUCTION, SALES AND OPERATION" published by the Company on 26 December 2017, 25 January 2018 and 9 February 2018, respectively.

- 12 -

On 11 July 2019, the Company and Vanke entered into the "Supplemental Agreement to the 'Framework Agreement for Entrustment of Development, Construction, Sale and Operation'" to amend and further define the two parties' rights and obligations and risks under the project. The aforesaid matter was considered and approved at the Sixth Meeting of the Eighth Session of the Board of Directors and the Second Extraordinary General Meeting of 2019 of the Company. For details, please refer to the "Announcement Resolutions of the Sixth Meeting of the Eighth Session of the Board of Directors" and "UPDATE ON DISCLOSEABLE TRANSACTION SUPPLEMENTAL AGREEMENT TO THE FRAMEWORK AGREEMENT FOR ENTRUSTMENT OF DEVELOPMENT, CONSTRUCTION, SALES AND OPERATION" published on 11 July 2019 and the "Announcement on Resolutions of the Second Extraordinary General Meeting of 2019" published by the Company on 29 July 2019.

On 16 July 2019, Vanke completed the payment to the Company of RMB72.64 million as described in "UPDATE ON DISCLOSEABLE TRANSACTION SUPPLEMENTAL AGREEMENT TO THE FRAMEWORK AGREEMENT FOR ENTRUSTMENT OF DEVELOPMENT, CONSTRUCTION, SALES AND OPERATION".

3.2.2.2 Non-public Issuance of A Shares by the Company

The Company proposed to issue not more than 686,836,019 A shares to not more than 10 specific investors compliant with the provisions of the China Securities Regulatory Commission ("CSRC"). Gross proceeds from the non-public issuance of A Shares will not exceed RMB13 billion. Net proceeds after deduction of issue expenses will be applied towards the "technology research and product development relating to 5G network evolution" and as "replenishment of working capital". The aforesaid matter has been considered and passed at the Twenty-sixth Meeting of the Seventh Session of the Board of Directors of the Company and the First Extraordinary General Meeting of 2018. For details, please refer to the "Overseas Regulatory Announcement Announcement Resolutions of the Twenty-sixth Meeting of the Seventh Session of the Board of Directors", "(1) PROPOSED NON-PUBLIC ISSUANCE OF A SHARES UNDER GENERAL MANDATE AND (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION" published on 31 January 2018 and the "Announcement on Resolutions of the First Extraordinary General Meeting of 2018" published on 28 March 2018 by the Company.

Pursuant to the "UPDATE ON THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES UNDER GENERAL MANDATE" issued by the Company on 1 February 2018, the issue price of the non-public issuance of A shares shall be no less than RMB30/share.

- 13 -

On 10 April 2018, the Company received a "Form of Admission of Application for CSRC Administrative Approval" issued by the CSRC, stating that CSRC had made a decision to admit the application for administrative approval of the non-public issuance of new shares by a listed company submitted by the Company. For details, please refer to the "Overseas Regulatory Announcement Announcement on Admission by CSRC of the Application for Non-public Issuance of A Shares" published by the Company on 10 April 2018.

The Company published the "Overseas Regulatory Announcement Announcement on the Receipt of 'Notice Regarding the China Securities Regulatory Commission's First Feedback on the Review of Administrative Permission Items'" and the "Overseas Regulatory Announcement Announcement on Extension of Deadline for Reply to the 'Notice Regarding the China Securities Regulatory Commission's First Feedback on the Review of Administrative Permission Items'" on 29 October 2018 and 19 November 2018, respectively. The Company worked with relevant intermediaries to study and deliberate on issues raised in the notice and furnished an item-by-item response. Please refer to the "Overseas Regulatory Announcement Announcement on Reply to the 'Notice Regarding the China Securities Regulatory Commission's First Feedback on the Review of Administrative Permission Items'" published by the Company on 23 January 2019 and "Overseas Regulatory Announcement Announcement on Reply (Revised Draft) to the Feedback on Application Materials for the Approval of Non-public Issuance of A Shares" published by the Company on 25 February 2019.

The "Resolution on the Extension of the Validity Period for the Shareholders' Resolutions in relation to the Non-public Issuance of A Shares of 2018", "Resolution on the Authorisation in relation to the Non-public Issuance of A Shares of 2018" and "Resolution on the Arrangement of the Floor Price of the Non-public Issuance of A Shares of 2018" were considered and approved at the Forty-fourth Meeting of the Seventh Session of the Board of Directors held on 17 January 2019 and the Company's First Extraordinary General Meeting of 2019 held on 20 March 2019. For details, please refer to the "Announcement Resolutions of the Forty-fourth Meeting of the Seventh Session of the Board of Directors" and

"(1) REVISED TERMS OF THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES UNDER THE GENERAL MANDATE (2) EXTENSION OF VALIDITY PERIOD OF THE SHAREHOLDERS' RESOLUTIONS IN RELATION TO THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES AND (3) NEW AUTHORIZATION TO THE BOARD IN RELATION TO THE PROPOSED NON-PUBLIC ISSUANCE OF A SHARES" published on 17 January 2019 and the "Announcement on Resolutions of the First Extraordinary General Meeting of 2019" published by the Company on 20 March 2019.

- 14 -

As stated in the "Overseas Regulatory Announcement Announcement in relation to Reply to Notification Letter on Preparation Works for Stock Issuance Examination and Verification Committee Meeting on Non-public Issuance of A Shares" published by the Company on 5 August 2019, the Company had conducted studies and deliberations in respect of issues raised in the Notification Letter in consultation with relevant intermediaries, and had furnished replies to the relevant questions. For such replies, please refer to the "Overseas Regulatory Announcement Reply to the 'Letter on Careful Preparation for the Application for the Stock Issuance Examination and Verification Committee Meeting on Non-public Issuance of Shares of ZTE Corporation'" published by the Company on 5 August 2019.

The Company has given an undertaking in accordance with pertinent requirements of the "Answers to Certain Questions on Refinancing Business" published by the CSRC. For details, please refer to the "Overseas Regulatory Announcement Announcement on Undertaking in respect of not Committing New Funds into the Quasi-financial Business" published by the Company on 7 August 2019.

On 22 August 2019, the CSRC Stock Issuance Examination and Verification Committee conducted verification in respect of the Company's application for non- public issuance of A shares. According to the outcome of verification, the Company's application for non-public issuance of A shares has been verified and approved. The Company has received the "Approval in Relation to the Non-public Issuance of Shares by ZTE Corporation" issued by the CSRC. For details, please refer to the "ANNOUNCEMENT IN RELATION TO APPROVAL BY THE ISSUANCE EXAMINATION AND VERIFICATION COMMITTEE OF THE CSRC ON APPLICATION FOR NON-PUBLIC ISSUANCE OF A SHARES" and

"ANNOUNCEMENT IN RELATION TO THE RECEIPT OF APPROVAL FROM THE CHINA SECURITIES REGULATORY COMMISSION FOR THE NON-PUBLIC ISSUANCE OF A SHARES" published by the Company on 22 August 2019 and 21 October 2019, respectively.

3.2.2.3 Change in the Directors, Supervisors and senior management of the Company

At the First Meeting of the Eighth Session of the Board of Directors of the Company held on 1 April 2019, it was approved that Ms. Li Ying, Executive Vice President and Chief Financial Officer of the Company, would undertake the duties of the Secretary to the Board of Directors on an acting basis. Following the conclusion of a period of three months since Ms. Li Ying undertook the duties of the Secretary to the Board of Directors on an acting basis, Mr. Li Zixue, Chairman of the Company, has undertaken the duties of the Secretary to the Board of Directors on an acting basis with effect from 1 July 2019 until the formal appointment of a Secretary to the Board of Directors by the Company. For details, please refer to the "Overseas Regulatory Announcement Announcement on the Chairman undertaking the duties of the Secretary to the Board of Directors on an acting basis" published by the Company on 1 July 2019.

- 15 -

At the Seventh Meeting of the Eighth Session of the Board of Directors of the Company held on 29 July 2019, it was approved that Mr. Ding Jianzhong be appointed Secretary to the Board of Directors for a term commencing on the date on which the resolution was considered and approved at the meeting of the Board of Directors of the Company and ending on the date on which the term of the Eighth Session of the Board of Directors concludes (namely, 29 March 2022). For details, please refer to the "Announcement Resolutions of the Seventh Meeting of the Eighth Session of the Board of Directors" and "Overseas Regulatory Announcement Announcement on the Appointment of the Secretary to the Board of Directors of the Company" published by the Company on 29 July 2019.

At the Ninth Meeting of the Eighth Session of the Board of Directors of the Company held on 19 September 2019, it was approved that Mr. Xie Junshi be appointed Executive Vice President of the Company for a term commencing on the date on which the resolution was considered and approved at the meeting of the Board of Directors of the Company and ending on the date on which the term of the Eighth Session of the Board of Directors concludes (namely, 29 March 2022). For details, please refer to the "Announcement Resolutions of the Ninth Meeting of the Eighth Session of the Board of Directors" published by the Company on 19 September 2019.

3.2.2.4 Information on the "Share Option Incentive Scheme" of the Company

The 2017 Share Option Incentive Scheme1 implemented by the Company has been approved by the Remuneration and Evaluation Committee, the Seventeenth Meeting of the Seventh Session of the Board of Directors, the Fourteenth Meeting of the Seventh Session of the Supervisory Committee and the 2016 Annual General Meeting, the First A Shareholders' Class Meeting of 2017 and the First H Shareholders' Class Meeting of 2017 of the Company. The source of shares under the 2017 Share Option Incentive Scheme comprises shares of the Company issued to the scheme participants by the Company by way of placing. Scheme participants of the 2017 Share Option Incentive Scheme include Directors, senior management and key employees who have a direct impact on, or have made outstanding contributions to the Company's overall results and sustainable development (excluding Independent Non-executive Directors, Supervisors and substantial shareholders interested in 5% or above of the Company's shares or the de facto controller, or their respective spouses and immediate or close family members). Pursuant to the "Resolution on Matters pertaining to the grant of share options under the 2017 Share Option Incentive Scheme" and "Resolution on the adjustments to the participants and number of share options granted under the 2017 Share Option Incentive Scheme" considered and passed at the Twentieth

1 The "2017 Share Option Incentive Scheme" means the share option incentive scheme considered and approved at the 2016 Annual General Meeting, the First A Shareholders' Class Meeting of 2017 and the First H Shareholders' Class Meeting of 2017 of the Company.

- 16 -

Meeting of the Seventh Session of the Board of Directors on 6 July 2017, the date of grant was set for 6 July 2017 (Thursday). The Company granted 149,601,200 share options to 1,996 scheme participants. The exercise price of the share options granted shall be RMB17.06 per A share.

On 1 July 2019, the "Resolution on the adjustments to the participants and number of share options granted under the 2017 Share Option Incentive Scheme", "Resolution on the fulfillment of exercise conditions for the first exercise period under the 2017 Share Option Incentive Scheme", "Resolution on the Non- fulfillment of exercise conditions for the second exercise period under the 2017 Share Option Incentive Scheme" and "Resolution on the cancellation of certain share options", among others, were considered and passed at the Fifth Meeting of the Eighth Session of the Board of Directors of the Company, pursuant to which the adjustments to participants and number of share options granted under the 2017 Share Option Incentive Scheme, confirmation of the fulfillment of exercise conditions for the first exercise period and non-fulfillment of exercise conditions for the second exercise period under the 2017 Share Option Incentive Scheme and cancellation of share options previously granted to original participants who no longer fulfilled the conditions to be a participant or share options that did not meet the exercise conditions were approved. The number of participants under the 2017 Share Option Incentive Scheme was adjusted from 1,996 to 1,687. A total of 70,210,561 share options, comprising share options previously granted to original participants who no longer qualified as participants and share options for which exercise conditions had not been fulfilled. For details, please refer to the "Overseas Regulatory Announcement Announcement on the Adjustment of Participants and Number of Share Options under the 2017 Share Option Incentive Scheme", "Overseas Regulatory Announcement Announcement on the Fulfillment of Exercise Conditions for the First Exercise Period under the 2017 Share Option Incentive Scheme", "Overseas Regulatory Announcement Announcement Non-fulfillment of Exercise Conditions for the Second Exercise Period under the 2017 Share Option Incentive Scheme" and "Overseas Regulatory Announcement Announcement on the Cancellation of Certain Share Options" published by the Company on 1 July 2019.

On 5 July 2019, the Company completed the cancellation of the 70,210,561 granted share options, as verified and confirmed by China Central Depository & Clearing Corporation Limited, Shenzhen Branch. For details, please refer to the "Overseas Regulatory Announcement Announcement on the Completion of Cancellation of Certain Share Options" published by the Company on 5 July 2019.

- 17 -

The first exercise period under the 2017 Share Option Incentive Scheme of the Company officially commenced on 16 July 2019, with 1,684 participants entitled to exercise a total of 39,664,153 share options exercisable. For details, please refer to the "Overseas Regulatory Announcement Announcement on the Commencement of the First Exercise Period under the 2017 Share Option Incentive Scheme" published by the Company on 14 July 2019. Details of the exercise of share options by participants during the first exercise period under the 2017 Share Option Incentive Scheme of the Company as at the date of this report are set out as follows:

				Number of				Number of
				options		Number of		outstanding
				exercisable for	options exercised		options for the
			the first exercise	during the first		first exercise
Name of participant	Position of participant		period		exercise period		period
Xu Ziyang	Director and President	84,000		0	84,000
Wang Xiyu	Executive Vice President	87,466		0	87,466
Li Ying	Executive Vice President	52,800		0	52,800
	and Chief Financial
	Officer
Xie Junshi	Executive Vice President	112,466		112,466	0
Ding Jianzhong	Secretary to the Board of	33,160		33,160	0
	Directors
Other participants	-	39,294,261		33,141,238	6,153,023

Total	-	39,664,153		33,286,864	6,377,289

For details of the 2017 Share Option Incentive Schemes of the Company, please refer to the section headed "Material Matters - (VIII) IMPLEMENTATION AND IMPACT OF THE COMPANY'S SHARE OPTION INCENTIVE SCHEME" in the 2019 Interim Report of the Company.

- 18 -

3.2.2.5 Material litigation and arbitration during the reporting period

During the reporting period, the Group did not incur any material litigation or arbitration. Progress during the reporting period of immaterial litigation and arbitration proceedings incurred prior to the reporting period are set out as follows:

1. On 11 June 2010, a lawsuit on breach of agreement and infringement of rights was instituted against the Company and its wholly-owned subsidiary ZTE (USA), Inc. ("ZTE USA") by Universal Telephone Exchange, Inc. ("UTE") at the district court of Dallas, Texas, the United States, alleging that the Company and ZTE USA had violated a confidential agreement between UTE and ZTE USA, for which UTE was seeking a compensation of USD20 million in actual damages. UTE further claimed that it had lost a telecommunications project contract, which otherwise should have been secured, as a result of inappropriate actions of the Company and ZTE USA, for which UTE was seeking a compensation of USD10 million in actual damages and USD20 million in punitive damages. Upon receipt of the writ of summons from the court, an attorney has been appointed by the Company to defend its case.

On 23 February 2012, the Company and ZTE USA applied to the court for the rejection of UTE's suit on the grounds that there was an arbitration clause under the confidential agreement. On 1 March 2012, the attorney representing UTE concurred with the Company's application to subject the case to the arbitration clause and executed with the Company an agreement which was then submitted to the court. On 1 May 2012, UTE filed an application for arbitration to the American Arbitration Association in respect of the case to demand compensation from the Company. UTE subsequently raised the amount of compensation claimed. On 19 September 2014, the arbitration court declared court trial of the case closed. On 17 February 2017, the arbitration court made a final rule to reject all compensation claims of UTE. On 21 February 2017, the Company submitted a request to the district court of Dallas, Texas for the ratification of the arbitration award. On 16 March 2017, UTE filed a motion to the district court of Dallas, Texas for the annulment of the arbitration award. On 19 June 2017, the district court of Dallas, Texas supported the request of UTE and ruled to annul the award of the arbitration court and ordered the case to be returned to the American Arbitration Association to reopen arbitration. On 7 July 2017, the Company filed an appeal with the court of appeal of Dallas, Texas in respect of the aforesaid ruling. On 19 November 2018, the court of appeal of Dallas, Texas ruled to overturn the ruling of the district court of Dallas, Texas of annulling the arbitration award and reinstated the arbitration award. On 4 December 2018, UTE made an application to the court of appeal of Dallas, Texas for review. On 4 January 2019, UTE made an application to the court of appeal of Dallas,

- 19 -

Texas for the case to be heard by the full court. On 14 February 2019, the court of appeal of Dallas, Texas ruled to reject the aforesaid application of UTE. On 1 April 2019, UTE made an application to the Supreme Court of Texas for Civil Matters for review. On 4 October 2019, the Supreme Court of Texas for Civil Matters ruled to reject UTE's application for review.

Based on the legal opinion furnished by legal counsels engaged by the Company and the progress of the case, the aforesaid case will not have any material adverse impact on the financial conditions and operating results of the Group for the current period.

2. In July 2012, Technology Properties Limited LLC, a U.S. company, filed a claim with United States International Trade Committee ("ITC") and the Federal District Court of California, respectively, in the United States, alleging the Company and ZTE USA of infringement upon its patents in chips. Defendants in the case included other companies in the industry. In the ITC case, the said company demanded the issue of a permanent exclusion and injunction order against the Company's and ZTE USA's products that had allegedly infringed its patent rights. In the case filed with the Federal District Court of California, damages for losses and payments of legal fees were demanded of the Company and ZTE USA, although no specific amount of compensation was named. The litigation procedure at the Federal District Court of California has been suspended. On 6 September 2013, ITC issued its preliminary judgment of the case, ruling that the Company and ZTE USA had not infringed upon the patents relating to the case, and that Section 337 had not been violated. On 19 February 2014, ITC issued its final determination in respect of the case, ruling that the Company and ZTE USA had not infringed upon the patents relating to the case and had not violated Section 337. In August 2014, the Federal District Court of California re-opened the litigation procedures for the case. In November 2015, the Federal District Court of California ruled that the Company and ZTE USA had not violated the patents relating to the case. The said company filed an appeal with the United States Court of Appeals for the Federal Circuit against the verdict of the Federal District Court of California. In April 2017, the United States Court of Appeals for the Federal Circuit ruled to reject the case and return it to the Federal District Court of California for retrial by the Federal District Court of California. In December 2017, the Federal District Court of California ruled that the Company and ZTE USA had not violated the patents relating to the case. In January 2018, the said company filed an appeal with the United States Court of Appeals for the Federal Circuit again against the said verdict of the Federal District Court of California. In February 2019, the United States Court of Appeals for the Federal Circuit ruled to uphold the judgement of the Federal District Court of California that the Company and ZTE USA had not infringed upon the patents under litigation. On 26 April 2019, the United States Court of Appeals

- 20 -

for the Federal Circuit ruled to reject the said company's application for the case to be heard by the full court of the United States Court of Appeals for the Federal Circuit. On 6 September 2019, the said company filed an appeal for the case with the Supreme Court of the United States. As of now, the Supreme Court of the United States has yet to grant admission to the appeal.

3.2.2.6 Approval for registration of the Company's Medium Term Notes and SCPs

The "Resolution on the Proposed Registration and Issue of Perpetual Medium Term Notes" and the "Resolution on the Proposed Registration and Issue of Super and Short-term Commercial Paper ("SCP")" was considered and approved at the First Extraordinary General Meeting of 2017 of the Company held on 14 December 2017. The Company's 2019 Tranche I Medium Term Notes with a registered amount of RMB2,000 million and SCP with a registered amount of

RMB8,000 million have been registered and approved by the National Association of Financial Market Institutional Investors (中國銀行間市場交易商協會). For

details, please refer to the "Overseas Regulatory Announcement Announcement on the Approval of Registration for the Medium Term Notes and Super and Short- term Commercial Paper" published by the Company on 10 October 2019.

- 21 -

3.2.2.7 Conduct of material connected transactions in accordance with domestic laws and regulations

Connected transactions in the ordinary course of business
The connected transactions disclosed in the following table represent connected transactions reaching the benchmark for public disclosure as defined under the Rules Governing Listing of Stocks on The Shenzhen Stock Exchange.

As a

percentage of

Whether

Market price

transactions

approved

for similar

Counterparty to

Amount

in the same

cap has

transactions

Domestic

connected

(RMB in ten

classification

been

available

announcement

transaction

Nature of connection

Classification

Subject matter

Pricing principle

Price (RMB)

thousands)

(%)

exceeded

Settlement

(RMB)

date

Domestic announcement index

Zhongxingxin and

Controlling

Purchase of

The purchase of cabinets and

Purchase of raw

Cabinets and related accessories:

36,727.73

1.09%

Commercial

N/A

2018-12-25

Announcement No. 2018104

its subsidiaries

shareholder of

raw

related accessories, cases and

materials by the

RMB1-RMB300,000 per unit, cases and

acceptance

"Announcement on

and companies

the Company

materials

related accessories, shelters,

Company and its

related accessories: RMB1-RMB15,000 per

bill

Projected Continuing

in which it held

and its

railings, antenna poles,

subsidiaries from

unit, depending on level of sophistication;

Connected Transactions

equity interests

subsidiaries and

optical products,

connected parties

Shelters: RMB1,000-RMB100,000 per unit

under the Rules Governing

of 30% or

companies in

refined-processing products,

were conducted

depending on measurement, materials used

Listing of Stocks on The

above

which it held

packaging materials, FPC,

at prices

and configuration;

Shenzhen Stock Exchange"

equity interests

R-FPC and components by

determined

Railings: RMB1,000-50,000 per piece

of 30% or above

the Company from the

through arm's

depending on level of sophistication and

connected party

length

functional features;

negotiations and

Antenna poles: RMB200-2,000 per piece

on the basis of

depending on level of sophistication and

normal

functional features;

commercial

Optical products: RMB1.3-30,000 per unit

terms. The prices

depending on level of sophistication and

of properties

functional features;

leased to

Refined-processing products: RMB0.5-50,000

connected parties

per unit depending on level of

by the Group

sophistication and functional features;

were determined

Packaging materials: RMB0.01-5,000 per piece

through arm's

depending on level of sophistication and

length

functional features;

negotiations

FPC, R-FPC and components: RMB0.5-100

based on normal

per piece depending on measurement, level

commercial

of process sophistication and materials

terms.

used.

Transaction

Huatong

Subsidiary of a

Purchase of

The purchase of personnel hiring

prices at which

Special-grade engineer at a price ranging from

3,354.00

0.10%

Tele-transfer

N/A

2018-12-25

Announcement No. 2018104

Technology

company for

software

and project outsourcing

products were

RMB970-1350 per head/day;

"Announcement on

Company

which a

outsourcing

services by the Company

sold by the

Supervisory engineer at a price ranging from

Projected Continuing

Limited

connected

services

from the connected party

Group to

RMB830-1040 per head/day;

Connected Transactions

("Huatong")

natural person

connected parties

Senior engineer at a price ranging from

under the Rules Governing

of the Company

were based on

RMB520-935 per head/day;

Listing of Stocks on The

acted as director

market prices

Common engineer at a price ranging from

Shenzhen Stock Exchange"

and executive

and were not

RMB440-570 per head/day;

vice president

lower than prices

Assistant engineer at a price ranging from

at which similar

RMB230-450 per head/day;

products of

Technician at a price ranging from

similar quantities

RMB280-400 per head/day.

were purchased

by third parties

from the Group,

taking into

consideration of

factors relating

to the specific

transactions such

as conditions of

the projects, size

of transaction

and product

costs.

- 22 -

						As a
						percentage of	Whether	Market price
						transactions	approved	for similar
Counterparty to					Amount	in the same	cap has	transactions	Domestic
connected					(RMB in ten	classification	been	available	announcement
transaction	Nature of connection Classification	Subject matter	Pricing principle	Price (RMB)	thousands)	(%)	exceeded Settlement	(RMB)	date	Domestic announcement index

ZTE Software	Subsidiary of a	Purchase of	The purchase of personnel hiring
Technology	company for	software	and project outsourcing
(Nanchang)	which a	outsourcing	services by the Company
Company	connected	services	from the connected party
Limited	natural person
("Nanchang	of the Company
Software")	acted as director
	and executive
	vice president
Nanchang	Subsidiary of a	Purchase of	The purchase of personnel hiring
Software	company for	engineering	services by the Company
	which a	services	from the connected party
	connected
	natural person
	of the Company
	acted as director
	and executive
	vice president

Special-grade engineer at a price ranging from RMB970-1350 per head/day;

Supervisory engineer at a price ranging from RMB830-1040 per head/day;

Senior engineer at a price ranging from RMB520-935 per head/day;

Common engineer at a price ranging from RMB440-570 per head/day;

Assistant engineer at a price ranging from RMB230-450 per head/day;

Technician at a price ranging from

RMB280-400 per head/day.

Work delivery personnel ranging from RMB398-1322 per head/day;

Ancillary product personnel ranging from RMB401-805 per head/day;

Core network personnel ranging from RMB485-851 per head/day;

Service product personnel ranging from RMB451-793 per head/day;

Wireless product personnel ranging from RMB418-774 per head/day;

Fixed-line product personnel ranging from RMB418-735 per head/day;

Bearer product personnel ranging from RMB418-735 per head/day;

Government and energy product personnel ranging from RMB433-1197 per head/day;

Network optimisation personnel ranging from RMB491-958 per head/day.

1,267.59 0.04% No Tele-transfer N/A 2018-12-25 Announcement No. 2018104 "Announcement on Projected Continuing Connected Transactions under the Rules Governing Listing of Stocks on The Shenzhen Stock Exchange"

- 0.00% No Tele-transfer N/A 2018-12-25 Announcement No. 2018104 "Announcement on Projected Continuing Connected Transactions under the Rules Governing Listing of Stocks on The Shenzhen Stock Exchange"

Shenzhen	A company for	Purchase of	The purchase of hotel services
Zhongxing	which a	hotel	by the Company from the
Hetai Hotel	connected	services	connected party
Investment and	natural person
Management	of the Company
Company	acted as director
Limited	and its
("Zhongxing	subsidiaries
Hetai") or its
subsidiaries
Zhongxing Hetai	A company for	Lease of	The lease of property and
or its	which a	property	related equipment and
subsidiaries	connected	and	facilities by the Company to
	natural person	equipment	the connected party
	of the Company	and
	acted as director	facilities
	and its
	subsidiaries

Purchase price not higher than prices at which	2,560.06	0.08%	No	Tele-transfer	N/A	2018-12-25	Announcement No. 2018104
Zhongxing Hetai sells products (or							"Announcement on
services) to other customers purchasing							Projected Continuing
similar products (or services) in similar							Connected Transactions
amounts, subject to the actual agreement							under the Rules Governing
signed by the two parties.							Listing of Stocks on The
							Shenzhen Stock Exchange"
RMB78/sq.m./month for hotel properties in	5,402.15	18.22%	No	Tele-transfer	N/A	2019-01-01	Announcement No. 201903
Dameisha in Shenzhen; RMB61/sq.m./							"Announcement on
month for hotel properties in Nanjing;							Projected Continuing
RMB82/sq.m./month for hotel properties							Connected Transactions
in Shanghai; RMB52/sq.m./month for							under the Rules Governing
hotel properties in Xi'an.							Listing of Stocks on The
The rental fee for related equipment and							Shenzhen Stock Exchange"
facilities required by the hotel operations

in Shenzhen, Shanghai, Nanjing and Xi'an was 1,550,000/year.

深圳市航天歐華科 Subsidiary of a	Sale of	The sale of a full range of
技發展有限責	company for	products	government and enterprise
任公司 ("航天	which a		products by the Company to
歐華")	connected		the connected party
	natural person
	of the Company
	acted as senior
	management
Total			-

Based on market prices and not lower than prices at which similar products of similar quantities were purchased by third parties from the Company, taking into consideration factors relating to the specific transactions such as conditions of the projects, size of transaction and product costs.

40,168.48	0.63%	No	Tele-transfer orN/A	2018-12-25	Announcement No. 2018104
				bank		"Announcement on
				acceptance		Projected Continuing
				bill		Connected Transactions
						under the Rules Governing
						Listing of Stocks on The
						Shenzhen Stock Exchange"
89,480.01	N/A	-	-	-	-	-

- 23 -

Detailed information of substantial sales return	None
Necessity and continuity of connected transactions and reasons for choosing to conduct	The aforesaid connected parties were able to manufacture products required by the Group on a regular basis and provide quality products, services and lease properties in sound conditions at
transactions with the connected party (rather than other parties in the market)	competitive prices. The Company considers trustworthy and cooperative partners as very important and beneficial to the Group's operations.
Effect of the connected transaction on the independence of the listed company	The Company was not dependent on the connected parties and the connected transactions would not affect the independence of the Company.
The Company's dependence on the connected party and relevant solutions (if any)	The Company was not dependent on the connected parties.
Projected total amount of continuing connected transaction during the period by type and	At the Forty-second Meeting of the Seventh Session of the Board of Directors of the Company held on 25 December 2018, it was considered and approved that the estimated purchases of raw
actual performance during the reporting period (if any)	materials from Zhongxingxin, a connected party, and its subsidiaries and companies in which it held equity interests of 30% or above by the Group in 2019 be capped at RMB700 million (before
	VAT);
	At the Forty-second Meeting of the Seventh Session of the Board of Directors of the Company held on 25 December 2018, it was considered and approved that the estimated purchases of
	software outsourcing services from Huatong and Nanchang Software, both connected parties, in 2019 be capped at RMB70 million and RMB30 million (before VAT), respectively;
	At the Forty-second Meeting of the Seventh Session of the Board of Directors of the Company held on 25 December 2018, it was considered and approved that the estimated purchases of
	engineering services from Nanchang Software, both a connected party during the periods from 25 December 2018 to 31 October 2019 and from 1 November 2019 to 31 October 2020 be capped
	at RMB1 million and RMB1 million (before VAT), respectively;
	At the Forty-second Meeting of the Seventh Session of the Board of Directors of the Company held on 25 December 2018, it was considered and approved that the estimated purchases of hotel
	services from Zhongxing Hetai, a connected party, or its subsidiaries by the Group in 2019 be capped at RMB36 million (before VAT);
	At the Forty-third Meeting of the Seventh Session of the Board of Directors of the Company held on 29 December 2018, it was considered and approved that the estimated lease of properties
	and equipment and facilities to Zhongxing Hetai or its subsidiaries by the Group in 2019 be capped at RMB72.06 million (before VAT);
	At the Forty-second Meeting of the Seventh Session of the Board of Directors of the Company held on 25 December 2018, it was considered and approved that the estimated sales of products
	to 航天歐華, a connected party, by the Group in 2019 be capped at RMB800 million (before VAT); and
	Please refer to the above table for details of the execution of the aforesaid continuing connected transactions.
Reason for the substantial difference between transaction prices and referential market prices	N/A
(if applicable)

Note: For details of "Approved Cap", please refer to the section headed "Projected total amount of continuing connected transaction during the period by type and actual performance during the reporting period (if any)".

Other material connected transactions
The following connected transactions were considered and approved at the Forty-first Meeting of the Seventh Session of the Board of Directors of the Company held on 31 October 2018. For details, please refer to the
"CONNECTED TRANSACTION PROVISION OF FINANCIAL ASSISTANCE BY CONTROLLING SHAREHOLDER" and "Announcement of Resolutions of the Forty-first Meeting of the Seventh Session of the Board of Directors" published by the Company on 31 October 2018:
On 31 October 2018, the Company entered into the Loan Agreement and Pledge Agreement with Zhongxingxin, controlling shareholder of the Company, pursuant to which the Company shall seek loans amounting to not more than RMB1,000 million (with tranche 1 and tranche 2 each capped at RMB500 million) from Zhongxingxin according to the Company's funding requirements, and shall pledge the equity interests in ZTE Microelectronics as security. The loan interest rate shall be determined through negotiation between the two parties subject pertinent laws and regulations based on market-oriented principles and by reference to the interest rates for loans of similar nature extended by other commercial banks and financial institutions, taking also into consideration factors such as the finance cost of Zhongxingxin for obtaining financing from relevant third party institutions. On 2 September 2019, the Company made a repayment of the RMB500 million tranche 1 loan. As at the end of the reporting period, the RMB500 million tranche 2 loan has not yet expired, the loan agreement is under normal progress.

- 24 -

3.3 Undertakings

1. Undertakings by relevant undertaking parties, including the de facto controller, shareholders, connected parties, acquirers of the Company and the Company overdue and outstanding during the reporting period

Undertaking given upon the initial public offering or any refinancing exercise
1. Zhongxingxin, the controlling shareholder of the Company, entered into "Non-Competition Agreement" with the Company on 19 November 2004, pursuant to which Zhongxingxin has undertaken to the Company that: Zhongxingxin will not, and will prevent and preclude any of its other subsidiaries from carrying on or participating in any activities in any businesses deemed to be competing with existing and future businesses of the Company in any form (including but not limited to sole ownership, equity joint venture or co-operative joint venture and direct or indirect ownership of equity or other interests in other companies or enterprises, other than through ZTE); Zhongxingxin will immediately terminate and/or procure any of its subsidiaries to terminate any participation in, management or operation of any competing businesses or activities that Zhongxingxin and/or such subsidiaries are participating in or carrying on in any manner at any time.
2. Zhongxingxin, the controlling shareholder of the Company, provided the following undertaking on 31 January 2018 in respect of the implementation of remedial measures to address the dilution of return for the current period due to the non-public issuance of A shares in 2018: (1) that it will not, for so long as it remains the controlling shareholder of the Company, act beyond its powers to interfere with the Company's operating and management activities or infringe upon the Company's interests; (2) that it will willingly assume the liability for compensating the Company or other shareholders in accordance with the law in the event of losses incurred by the Company or other shareholders as a result of its violation of or refusal to honour its undertaking.
3. On 7 August 2019, the Company gave an undertaking in respect of the Company's proposed non-public issue of A Shares in accordance with the pertinent requirements of set out in the "Answers to Certain Questions on Refinancing Business" published by the CSRC: If the non-public issuance of A shares is approved by the competent authorities, including the CSRC and is implemented, prior to the utilisation in full of proceeds from the non-public issuance of A shares or within 36 months from the date of
  receipt of the issue proceeds, the Company shall not commit new funds into the quasi-financial business (類金融業務) (including fund commitments in various forms such as capital increase, loans and guarantees, among others).

- 25 -

(2) Other undertaking given to minority shareholders of the Company

On 10 December 2007, Zhongxingxin gave an undertaking that it shall disclose any intention in future to dispose of unlocked shares in the Company held via the securities trading system to sell down shareholdings by a volume equivalent to 5% or more within six months after the first sell-down, by way of an indicative announcement to be published by the Company within two trading days before the first sell-down.

2. Undertaking by the Directors and senior management of the Company in relation to the implementation of remedial measures to address the dilution of return for the current period due to the non-public issuance of A shares of the Company in 2018

The Directors and senior management of the Company provided the following undertaking on 31 January 2018 in respect of the implementation of remedial measures to address the dilution of return for the current period due to the non- public issuance of A shares in 2018: (1) that they will not be engaged in tunneling in favour of other units or individuals on a no-payment basis or upon unfair terms, or otherwise compromise the interests of the Company in any other manner; (2) that they will exercise restraint in spending when performing duties of their office;

that they will not misappropriate Company assets for investing activities or expenses not related to the performance of their duties; (4) that they will procure the linking of the remuneration regime formulated by the Board of Directors or the Remuneration Committee of the Board of Directors with the implementation of the Company's measures relating to compensation for return; (5) that they will procure the linking of the exercise conditions under the Company's share option incentives to be announced with the implementation of the Company's measures relating to compensation for return; (6) that they will willingly assume the liability for compensating the Company or shareholders in accordance with the law in the event of losses incurred by the Company or shareholders as a result of their violation of or refusal to honour their undertaking.

- 26 -

3.4 Warnings of and reasons for any projected accumulated net loss or substantial change in accumulated net profit for the period from the beginning of the year to the end of the next reporting period as compared to the same period last year

√ Applicable □ N/A

Preliminary results	Turnaround from loss to profit
	From the beginning of
	year to end of next
	reporting period	Same period last
	(January to	year (January to	Percentage of change
	December 2019)	December 2018)	(increase/decrease)

Net profit attributable to holders	Profit: 4,300,000-	Loss: 6,983,662	Increased by: 161.57%
of ordinary shares of the listed	5,300,000		- 175.89%
company (RMB'000)
Basic earnings per share	Profit: 1.02-1.25	Loss: 1.67	Increased by: 161.08%
(RMB/share)			- 174.85%
Explanatory statement regarding	The significant growth	in the Group's results for the 12 months
the preliminary results	ended 31 December 2019 compared to the same period last year was
	attributable mainly to (1) loss reported for the same period last year
	mainly attributable to the USD1 billion penalty described in the
	"INSIDE INFORMATION ANNOUNCEMENT AND
	RESUMPTION OF TRADING" published on 12 June 2018 and
	operating losses and loss provisions arising from the matter
	described in the "INSIDE INFORMATION ANNOUNCEMENT"
	published by the Company on 9 May 2018; and (2) income relevant
	to matters described in the "UPDATE ON DISCLOSEABLE
	TRANSACTION SUPPLEMENTAL AGREEMENT TO THE
	FRAMEWORK AGREEMENT FOR ENTRUSTMENT OF
	D E V E L O P M E N T , C O N S T R U C T I O N , S A L E S A N D
	OPERATION" published on 11 July 2019 recognised by the
	Company for the third quarter of 2019.

Note 1: Basic earnings per share has been calculated on the basis of the Company's total share capital of 4,225,959,000 shares as at the date of publication of this report.

Note 2: The aforesaid preliminary results announcement has not been pre-audited by a certified public accountant. For details, please refer to the "Preliminary Announcement of 2019 Annual Results" published by the Company on 28 October 2019.

- 27 -

3.5 Other material matters requiring disclosure

3.5.1 Investment in securities

1. Investment in securities at the end of the reporting period

Unit: RMB in ten thousands

						Gain/(loss)	Cumulative
						arising from	fair value	Amount	Amount	Gain/(loss)
					Book value at	fair value	change	purchased	disposed	for the	Book value at
Type of			Initial	Accounting	the beginning	change for	accounted for	during the	during the	reporting	the end of the	Accounting
securities	Stock code	Stock name	investment	method	of the period	the period	in equity	period	period	period	period	classification	Source of funds

Stock	300438	Great Power Note 1	121.41	Fair-value	570.46	35.66	-	-	-	37.79	606.12	Trading financial	Issue fund
				measurement			-	-			-	assets
Stock	300502	Eoptolink Note 1	833.03	Fair-value	9,259.67	(8,426.64)	11,272.00	1,297.73	Trading financial	Issue fund
				measurement			-	-			-	assets
Stock	603986	Giga Device Note 1	704.18	Fair-value	21,515.36	(20,811.18)	36,675.51	13,264.15	Trading financial	Issue fund
				measurement			-	-			-	assets
Stock	603633	Laimu Note 1	1,616.00	Fair-value	3,508.34	(1,892.34)	3,960.11	321.40	Trading financial	Issue fund
				measurement			-	-				assets
Stock	603920	Olympic Circuit	2,562.00	Fair-value	14,757.50	(12,021.96)	16,971.27	2,694.89	198.61	Trading financial	Issue fund
		Technology Note 1		measurement			-	-				assets
Stock	002902	Mentech Optical Note 1	1,548.03	Fair-value	11,382.83	1,268.82	5,535.17	5,947.68	11,933.40	Trading financial	Issue fund
				measurement			-	-				assets
Stock	002036	Lianchuang	2,921.74	Fair-value	5,298.94	2,346.47	3,177.18	4,144.61	6,357.73	Trading financial	Issue fund
		Electronic Note 2		measurement			-	-				assets
Stock	300691	Union Optech Note 2	3,498.71	Fair-value	9,842.80	1,307.45	3,933.06	4,230.44	10,030.68	Trading financial	Issue fund
				measurement			-	-				assets
Stock	002796	Shijia Science &	1,575.00	Fair-value	3,552.42	60.43	2,258.35	1,482.58	2,827.53	Trading financial	Issue fund
		Technology Note 2		measurement			-	-	-			assets
Stock	603068	Beken Note 3	2,175.99	Fair-value	2,175.99	8,429.06	8,429.06	10,605.05	Trading financial	Issue fund
				measurement			-	-	-			assets
Stock	688019	Anji Technology Note 3	4,350.00	Fair-value	3,317.99	24,051.20	24,051.20	27,369.19	Trading financial	Issue fund
				measurement			-	-	-			assets
Stock	ENA: TSV	Enablence	3,583.26	Fair-value	1,707.99	(1,196.74)	(1,196.74)	511.25	Other non-current	Internal funds
		Technologies Note 4		measurement								financial assets
Other securities investments held at the end	-	-	-	-	-	-	-	-	-	-	-
of the period
Total			25,489.35	-	86,890.29	(6,849.77)	-	-	83,782.65	64,704.79	70,439.56	-	-

Note 1: Figures corresponding to Guangzhou Great Power Energy & Technology Co., Ltd. ("Great Power"), Eoptolink Technology Inc., Ltd. ("Eoptolink"), Giga Device Semiconductor (Beijing) Inc. ("Giga Device"), Shanghai Laimu Electronics Co., Ltd. ("Laimu"), Olympic Circuit Technology Co., Ltd. ("Olympic Circuit Technology") and Dongguan Mentech Optical & Magnetic Co., Ltd ("Mentech Optical") are provided with Shenzhen Zhonghe Chunsheng Partnership Private Equity Fund I (Limited Partnership) ("Zhonghe Chunsheng Fund I") as the accounting subject.

Note 2: Figures corresponding to Lianchuang Electronic Technology Co., Ltd. ("Lianchuang Electronic"), Union Optech Co., Ltd. ("Union Optech") and Suzhou Shijia Science

Technology Inc. ("Shijia Science & Technology") are provided with Jiaxing Xinghe Equity Investment Partnership (Limited Partnership) ("Jiaxing Fund") as the accounting subject.

Note 3: Figures corresponding to Beken Corporation ("Beken") and Anji Microelectronics Technology (Shanghai) Co., Ltd. ("Anji Technology") are provided with Suzhou Zhonghe Chunsheng Partnership Investment Fund III (Limited Partnership) ("Zhonghe Chunsheng Fund III") as the accounting subject.

- 28 -

Note 4: The initial investment for the acquisition of Enablence Technologies Inc. ("Enablence Technologies") shares by ZTE H.K. Limited ("ZTE HK"), a wholly-owned subsidiary of the Company, on 6 January 2015 amounted to CAD2.70 million, equivalent to approximately RMB13,931,000 based on the Company's foreign currency statement book exchange rate (CAD1: RMB5.15963) on 31 January 2015. The initial investment amount for the acquisition of shares in Enablence Technologies on 2 February 2016 was CAD4.62 million, equivalent to approximately RMB21,901,600 based on the Company's foreign currency statement book exchange rate (CAD1: RMB4.74060) on 29 February 2016. The book value of the investment as at the end of the reporting period was approximately HKD5,623,700, equivalent to approximately RMB5,112,500 based on the Company's foreign currency statement book exchange rate (HKD1: RMB0.90910) on 30 September 2019.

2. Details of investment in securities during the reporting period

Shareholdings in Great Power
As at the end of the reporting period, the Company and ZTE Capital held in aggregate 31% equity interests in Zhonghe Chunsheng Fund I, a partnership reported in the consolidated financial statements of the Company. As at the end of the reporting period, Zhonghe Chunsheng Fund held 353,000 shares in Great Power (a company listed on the GEM Board of the Shenzhen Stock Exchange), accounting for 0.13% of the total share capital of Great Power.
Shareholdings in Eoptolink
During the first three quarters of 2019, Zhonghe Chunsheng Fund I transferred 4,712,300 shares in Eoptolink (a company listed on the GEM Board of the Shenzhen Stock Exchange) it held. As at the end of the reporting period, Zhonghe Chunsheng Fund I did not hold any shares in Eoptolink.
Shareholdings in Giga Device
During the first three quarters of 2019, Zhonghe Chunsheng Fund I transferred 3,452,400 shares in Giga Device (a company listed on the Shanghai Stock Exchange) it held. As at the end of the reporting period, Zhonghe Chunsheng Fund I did not hold any shares in Giga Device.
Shareholdings in Laimu
During the first three quarters of 2019, Zhonghe Chunsheng Fund I transferred 3,695,200 shares (following the implementation of its 2018 equity distribution plan) in Laimu (a company listed on the Shanghai Stock Exchange) it held. As at the end of the reporting period, Zhonghe Chunsheng Fund I did not hold any shares in Laimu.

- 29 -

Shareholdings in Olympic Circuit Technology
During the first three quarters of 2019, Zhonghe Chunsheng Fund I transferred 12,269,600 shares in Olympic Circuit Technology (a company listed on the Shanghai Stock Exchange) it held. As at the end of the reporting period, Zhonghe Chunsheng Fund I held 121,300 shares in Olympic Circuit Technology, accounting for 0.03% of the total share capital of Olympic Circuit Technology.
Shareholdings in Mentech Optical
During the first three quarters of 2019, Zhonghe Chunsheng Fund I transferred 2,232,200 shares in Mentech Optical (a company listed on the Small and Medium Enterprise Board of the Shenzhen Stock Exchange) it held. As at the end of the reporting period, Zhonghe Chunsheng Fund I held 3,868,200 shares in Mentech Optical (following the implementation of its 2018 equity distribution plan), accounting for 1.84% of the total share capital of Mentech Optical.
Shareholdings in Lianchuang Electronic
As at the end of the reporting period, the Company and ZTE Capital held in aggregate 31.79% equity interests in Jiaxing Fund, which was a partnership reported in the consolidated financial statements of the Company. During the first three quarters of 2019, Jiaxing Fund transferred 2,717,500 shares in Lianchuang Electronic (a company listed on the Small and Medium Enterprise Board of the Shenzhen Stock Exchange) it held. As at the end of the reporting period, Jiaxing Fund held 4,477,300 shares in Lianchuang Electronic (following the implementation of its 2018 equity distribution plan), accounting for 0.63% of the total share capital of Lianchuang Electronic.
Shareholdings in Union Optech
During the first three quarters of 2019, Jiaxing Fund transferred 2,215,900 shares in Union Optech (a company listed on the GEM Board of the Shenzhen Stock Exchange) it held. As at the end of the reporting period, Jiaxing Fund held 4,810,900 shares in Union Optech, accounting for 2.13% of the total share capital of Union Optech.
Shareholdings in Shijia Science & Technology
During the first three quarters of 2019, Jiaxing Fund transferred 568,000 shares in Shijia Science & Technology (a company listed on the Small and Medium Enterprise Board of the Shenzhen Stock Exchange) it held. As at the end of the reporting period, Jiaxing Fund held 771,300 shares in Shijia Science & Technology (following the implementation of its 2018 equity distribution plan), accounting for 0.46% of the total share capital of Shijia Science & Technology.
- 30 -

Shareholdings in Beken
As at the end of the reporting period, the Company and Changshu Changxing Capital Management Company Limited, a wholly-owned subsidiary of ZTE Capital, held in aggregate 25.83% equity interests in Zhonghe Chunsheng Fund III, a partnership reported in the consolidated financial statements of the Company. As at the end of the reporting period, Zhonghe Chunsheng Fund III held 1,122,200 shares in Beken (a company listed on the Shanghai Stock Exchange), accounting for 0.81% of the total share capital of Beken.
Shareholdings in Anji Technology
Anji Technology in which Zhonghe Chunsheng Fund III had invested was listed on the STAR Market of the Shanghai Stock Exchange on 22 July 2019. As at the end of the reporting period, Zhonghe Chunsheng Fund III held 2,314,509 shares in Anji Technology, accounting for 4.36% of the total share capital of Anji Technology.
Shareholdings in Enablence Technologies
ZTE HK, a wholly-owned subsidiary of the Company, entered into a Subscription Agreement with Enablence Technologies on 4 December 2014. ZTE HK subscribed for 18 million shares issued by Enablence Technologies on 6 January 2015 for a total cash consideration of CAD2.70 million. ZTE HK entered into a Subscription Agreement with Enablence Technologies on 27 January 2016. On 2 February 2016, ZTE HK subscribed for 77 million shares issued by Enablence Technologies for a total cash consideration of CAD4.62 million. As at the end of the reporting period, ZTE HK held 95 million shares in Enablence Technologies, accounting for 14.80% of its total share capital.
Save as aforesaid, the Group did not invest in non-listed financial enterprises such as commercial banks, securities companies, insurance companies, trusts or futures companies, or conduct securities investment such as dealing in stocks of other listed companies during the reporting period.

- 31 -

3.5.2 Entrusted fund management

1. Particulars of the Group's entrusted fund management during the reporting period is set out in the table below:

Unit: RMB in ten thousand

		Amount of funds
		under entrusted		Amount overdue
	Source of funds under	management	Outstanding	and yet to be
Specific type	entrusted management	incurred Note	balance	recouped

Bank investment	Internal funds
product		3,295	2,902	-
Total		3,295	2,902	-

Note: The amount of funds under entrusted management incurred represents the highest daily balance of such entrusted funds during the reporting period, namely, the maximum value of the total outstanding daily balance of such entrusted funds during the reporting period.

Details of high-risk entrusted fund management with individually material amounts or a lower level of security or liquidity without guaranteed repayment of principal
- Applicable √ N/A
Expected inability to recoup the principal amount under entrusted fund management or other situations that might result in impairment
- Applicable √ N/A

3.5.3 Records of Reception of Investors, Communications and Press Interviews during the Reporting Period

√ Applicable □ N/A

					Key contents	Information
Nature	Time	Location	Mode	Audience received	discussed	furnished

External	September 2019	Shenzhen	HSBC Qianhai	Customers of HSBC	Day-to-day	Published
meeting			investors'	Qianhai	operations of the	announcements
			meeting		Company	and regular
						reports

- 32 -

3.6

Derivative Investments

Unit: RMB in ten thousands

Closing

balance of

investment

amount as a

percentage

of net

Initial

assets Note 3

investment

of the

Actual

amount

Opening

Amount

Impairment

Closing

Company at

profit or

Whether a

Type of

in the

balance of

purchased

disposed

provision

balance of

the end of

loss for the

Name of party operating

Connected

connected

derivative

investment

during the

amount

investment

the period

reporting

the derivative investment

relationship

transaction

investment Note 1

investment

Start date

End date

amount Note 2

period

(if any)

amount

(%)

period

Financial institution

N/A

Foreign

2018/10/8

2020/8/11

410,016.63

225,671.10

325,500.53

310,187.20

11.17%

(5,877.94)

exchange

forwards

Financial institution

N/A

Foreign

2018/12/10

2020/8/19

347,533.61

217,141.29

350,316.36

214,358.54

7.72%

(4,062.02)

exchange

forwards

Financial institution

N/A

Foreign

2018/10/22

2020/9/28

377,313.95

210,876.15

389,402.05

198,788.05

7.16%

(3,766.97)

exchange

forwards

Other financial institution

N/A

Foreign

2018/10/24

2022/12/26

672,541.81

812,320.62

717,652.27

767,210.16

27.63%

(14,538.37)

exchange

forwards/

interest rate

swap

Total

1,807,406.00

1,466,009.16

1,782,871.21

1,490,543.95

53.68%

(28,245.30)

Source of funds for derivative investment

Internal funds

Litigation (if applicable)

Date of announcement of the Board of Directors in respect of the approval of derivative investments (if any)

Not involved in any litigation

"Overseas Regulatory Announcement Announcement Resolutions of the Twenty-eighth Meeting of the Seventh Session of the Board of Directors" and "Overseas Regulatory Announcement Announcement on the Application for Derivative Investment Limits for 2018," both dated 15 March 2018, and "Announcement Resolutions of the Forty-sixth Meeting of the Seventh Session of the Board of Directors" and "Overseas Regulatory Announcement Announcement on the Application for Derivative Investment Limits for 2019," both dated 27 March 2019.

Date of announcement of the general meeting in respect of the approval of derivative investments (if any)

"Announcement on Resolutions of the 2017 Annual General Meeting" dated 29 June 2018 and "Announcement on Resolutions of the 2018 Annual General Meeting" dated 30 May 2019.

Risk analysis and control measures (including but not limited to	Value-protection derivative investments were conducted by the Company during the first three quarters of 2019. The major risks and
market risks, liquidity risks, credit risks, operational risks and legal	control measures are discussed as follows:
risks) in respect of derivative positions during the reporting period	1.	Market risks: Gains or losses arising from the difference between the exchange rate for settlement of value protection derivative
		investment contracts and the exchange rate prevailing on the maturity date will be accounted for as gains or losses on
		revaluation for each accounting period during the effective period of the value-protection derivative investments. Effective gains
		or losses shall be represented by the accumulative gains or losses on revaluation on the maturity date;
	2.	Liquidity risks: The value-protection derivative investments of the Company were based on the Company's budget of foreign
		exchange income and expenditure and foreign exchange exposure and these investments matched the Company's actual foreign
		exchange income and expenditure to ensure sufficient fund for settlement on completion. Therefore, their impact on the
		Company's current assets was insignificant;
	3.	Credit risks: The counterparties of the derivative investment trades of the Company are banks with sound credit ratings and long-
		standing business relationships with the Company and therefore the transactions were basically free from performance risks;
	4.	Other risks: Failure of personnel in charge to operate derivative investments in accordance with stipulated procedures or fully
		understand information regarding derivatives in actual operation may result in operational risks; Obscure terms in the trade
		contract may result in legal risks;
	5.	Control measures: The Company addressed legal risks by entering into contracts with clear and precise terms with counterparty
		banks and strictly enforcing its risk management system. The Company has formulated the "Risk Control and Information
		Disclosure System relating to Investments in Derivatives" that contains specific provisions for the risk control, approval
		procedures and subsequent management of derivative investments, so that derivative investments will be effectively regulated and
		risks relating to derivative investments duly controlled.

Changes in the market prices or fair values of invested derivatives during the reporting period, including the specific methods, assumptions and parameters adopted in the analysis of the fair values of the derivatives

The Company has recognised gains/losses from investments in derivatives during the reporting period. Total losses recognised for the reporting period amounted to RMB282 million, comprising losses from fair-value change of RMB394 million and recognised investment gains of RMB112 million. The calculation of the fair value was based on forward exchange rates quoted by Reuters on a balance sheet date in line with the maturity date of the product.

Statement on whether the accounting policy and accounting audit	There was no significant change in the Company's accounting policy and accounting audit principles for derivatives for the reporting
principles for derivatives for the reporting period were significantly	period as compared to that of the previous reporting period.
different from the previous reporting period

Specific opinion of Independent Non-executive Directors on the Company's derivative investments and risk control

Independent Non-executive Directors' Opinion:

The Company has conducted value protection derivative investments by using financial products to enhance its financial stability, so as to mitigate the impact of exchange rate volatility on its assets, liabilities and profitability. The Company has conducted stringent internal assessment of its derivative investments made and has established corresponding regulatory mechanisms and assigned dedicated staff to be in charge thereof. The counterparties with which the Company and its subsidiaries have entered into contracts for derivative investments are organisations with sound operations and good credit standing. The derivative investments made by the Company and its subsidiaries have been closely related to their day-to-day operational requirements and the internal review procedure performed have been in compliance with relevant laws and regulations and the Articles of Association.

- 33 -

Note 1: Derivative investments are classified according to the financial institutions involved and the types of such derivative investments;

Note 2: The investment amount at the beginning of the period represented the amount denominated in the original currency translated at the exchange rate prevailing as at the end of the reporting period;

Note 3: Net assets as at the end of the reporting period represented net assets attributable to holders

of ordinary shares of the listed company as at the end of the reporting period.

3.7 This quarterly report is published in both Chinese and English. In case of any discrepancy between the Chinese and English versions, the Chinese version shall prevail.

§4 APPENDICES

Balance Sheet (unaudited) (Please see the attached.)
Income Statement (unaudited) (Please see the attached.)
Cash Flow Statement (unaudited) (Please see the attached.)

- 34 -

BALANCE SHEET
					RMB in thousands
	2019.9.30	2018.12.31
Assets		Consolidated		Company	Consolidated	Company
		(Unaudited)		(Unaudited)	(Audited)	(Audited)
					(Restated)	(Restated)
Current assets:	32,746,991	14,270,665
Cash	24,289,798	11,523,002
Trading financial assets	728,303		-	1,476,823	-
Derivative financial assets	84,541	49,385	228,117	72,450
Trade receivables	19,795,060	25,283,561	21,592,325	29,045,827
Receiving financing	3,028,806	2,319,226	2,730,351	2,030,426
Factored trade receivables	539,256	327,174	587,869	356,134
Prepayments	700,196	3,409	615,489	37,194
Other receivables	1,397,696	5,259,958	2,004,870	15,935,675
Inventories	29,757,759	20,002,633	25,011,416	15,343,153
Contract assets	11,132,779	4,684,036	8,462,226	3,911,263
Other current assets		8,034,783		4,429,082	5,848,369	3,218,932
Total current assets	107,946,170	76,629,129	92,847,653	81,474,056
Non-current assets:

1,965,048	6,938,919
Long-term trade receivables	843,429	5,542,886
Factored long-term trade	427,180	401,911
receivables	432,041	270,063
Long-term equity investments	2,697,184	12,775,306	3,015,295	13,168,721
Other non-current financial	1,530,527	674,723
assets	1,502,499	658,078
Investment properties	2,016,979	1,560,628	2,011,999	1,556,775
Fixed assets	9,143,831	5,424,399	8,898,068	5,319,213
Construction in progress	1,939,434	321,540	1,296,044	250,417
Right-of-use assets	1,043,732	586,449		-	-
Intangible assets	7,328,872	2,972,750	8,558,488	5,210,847
Deferred development costs	2,115,764	323,755	2,732,356	379,318
Goodwill	186,206		-	186,206	-
Deferred tax assets	2,590,162	1,167,778	2,787,790	1,383,311
Other non-current assets		6,228,264		5,200,407	4,238,881	3,094,949
Total non-current assets	39,213,183	38,348,565	36,503,096	36,834,578


Total assets	147,159,353	114,977,694	129,350,749	118,308,634


Legal Representative:	Chief Financial Officer:	Head of Finance Division:
Li Zixue	Li Ying			Xu Jianrui

- 35 -

					RMB in thousands
	2019.9.30	2018.12.31
Liabilities	Consolidated		Company		Consolidated		Company
	(Unaudited)		(Unaudited)		(Audited)		(Audited)
					(Restated)		(Restated)
Current liabilities:
Short-term loans	30,146,767	12,130,200	23,739,614	13,072,700
Bank advances on factored
trade receivables	541,451	329,366	591,931	360,196
Derivative financial liabilities	337,917	246,212	101,332	14,041
Bills payables	8,906,316	20,906,090	7,915,700	12,019,698
Trade payables	18,492,105	6,300,308	19,527,404	34,535,131
Contract liabilities	17,723,027	10,485,999	14,479,355	9,204,928
Salary and welfare payables	7,790,998	4,438,057	6,259,639	3,229,594
Taxes payable	779,171	104,571	954,021	219,325
Other payables	5,377,326	22,797,345	11,135,030	18,280,463
Provisions	1,944,633	1,344,407	2,167,614	1,757,603
Non-current liabilities due
within one year	751,685	357,055	1,243,709	370,000

Total current liabilities	92,791,396	79,439,610	88,115,349	93,063,679
Non-current liabilities:


Long-term loans	8,507,003	6,578,900	2,366,568	2,115,290
Bank advances on factored
long-term trade receivables	427,372	403,809	434,137	272,159
Lease liabilities	628,743	400,582		-		-
Provision for retirement
benefits	133,589	133,589	136,245	136,245
Deferred income	3,530,558	1,150,260	1,953,057	1,067,445
Deferred tax liabilities	180,873		-	155,041		-
Other non-current liabilities	3,732,502	2,376,766	3,229,677	2,697,982

Total non-current liabilities	17,140,640	11,043,906	8,274,725	6,289,121


Total liabilities	109,932,036	90,483,516	96,390,074	99,352,800

- 36 -

					RMB in thousands
	2019.9.30	2018.12.31
Shareholders' equity	Consolidated	Company		Consolidated	Company
	(Unaudited)	(Unaudited)		(Audited)	(Audited)
					(Restated)	(Restated)
Shareholders' equity:
Share capital	4,225,959		4,225,959	4,192,672		4,192,672
Capital reserves	12,105,233		9,955,893	11,444,456		9,244,984
Other comprehensive income	(2,000,979)	704,152	(2,047,561)	704,686
Surplus reserve	2,324,748		1,662,992	2,324,748		1,662,992
Retained profits	11,111,111		1,780,684	6,983,261		(3,101,864)
Total equity attributable to
ordinary shareholders of the
parent	27,766,072		18,329,680	22,897,576		12,703,470
Other equity instruments -
perpetual capital instruments	6,164,498		6,164,498	6,252,364		6,252,364
Non-controlling interests	3,296,747		-	3,810,735		-

Total shareholders' equity	37,227,317		24,494,178	32,960,675		18,955,834
Total liabilities and


shareholders' equity	147,159,353		114,977,694	129,350,749		118,308,634

- 37 -

INCOME STATEMENT
							RMB in thousands
			Nine months ended	Nine months ended
Item			30 September 2019	30 September 2018
			Consolidated	Company	Consolidated	Company
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
							(Restated)	(Restated)
1.	Operating revenue	64,240,698		55,773,839		58,766,186				54,698,659
	Less:	Operating costs	39,593,333		46,923,086		39,782,746				45,679,241
		Taxes and surcharges	728,483		369,875		486,762				133,358
		Selling and distribution costs	5,690,699		3,577,118		6,641,162				3,610,108
		Administrative expenses	3,520,527		2,901,655		1,903,312				1,132,657
		Research and development costs	9,359,500		2,473,303		8,525,829				2,141,020
		Finance costs	540,134		(14,391)	(308,966)	(714,073)
		Including: Interest expenses	1,226,681		678,146		651,115				325,423
		Interest income	513,535		277,495		600,118				100,659
	Add:	Other income	1,488,962		336,503		2,025,730				230,711
		Investment income	618,839		6,062,925		(417,854)	(236,938)
		Including: Share of losses of associates	(239,582)	(147,364)
		and joint ventures	(478,214)	(400,495)
		Loss on derecognition of
		financial assets at	(102,562)	(27,737)
		amortised cost	(148,085)	(72,132)
		Gains/(Losses) from changes in fair	(423,856)	(239,705)
		values	(759,435)	59,005
		Credit impairment losses	(2,115,113)	(1,783,384)	(1,926,974)	(1,868,253)
		Asset impairment losses	(1,181,251)	(1,070,215)	(1,339,690)	(902,620)
		Gain from asset disposal	2,687,413		2,687,413		-		-
2.	Operating profit	5,883,016		5,536,730		(682,882)	(1,747)
	Add:	Non-operating income	143,581		79,334		98,800				56,284
	Less:	Non-operating expenses	210,480		107,846		6,964,719				6,855,289
3.	Total profit	5,816,117		5,508,218		(7,548,801)	(6,800,752)

	Less:	Income tax	998,172		364,936		(236,391)	(700,931)

4.	Net profit	4,817,945		5,143,282		(7,312,410)	(6,099,821)


	Analysed by continuity of operations	4,817,945		5,143,282
	Net profit from continuing operations			(7,312,410)	(6,099,821)
	Attributable to holders of ordinary shares of	4,127,850		4,882,548
	the parent			(7,259,723)	(6,419,581)
	Attributable to holders of perpetual capital	260,734		260,734
	instruments			319,760				319,760
	Non-controlling interests	429,361		-	(372,447)	-

- 38 -

							RMB in thousands
			Nine months ended	Nine months ended
Item			30 September 2019	30 September 2018
			Consolidated		Company	Consolidated	Company
			(Unaudited)		(Unaudited)	(Unaudited)	(Unaudited)
							(Restated)	(Restated)
5.	Other comprehensive income, net of tax	64,803	(534)	(813,037)	(524)
	Other comprehensive income attributable to
	holders of ordinary shares of the parent, net
	of tax	46,582	(534)	(791,926)	(524)
	Other comprehensive income that will be
	reclassified to profit and loss in subsequent
	accounting periods
	Exchange differences on translation of
	foreign operations	46,582	(534)	(791,926)	(524)

			46,582	(534)	(791,926)	(524)
	Items of other comprehensive income, net of

	tax	46,582	(534)	(791,926)	(524)
	Other comprehensive income attributable to
			-
	non-controlling interests, net of tax	18,221		(21,111)	-

6.	Total comprehensive income	4,882,748	5,142,748		(8,125,447)	(6,100,345)


	Attributable to holders of ordinary shares of
	the parent	4,174,432	4,882,014		(8,051,649)	(6,420,105)
	Attributable to holders of perpetual capital
	instruments	260,734	260,734		319,760		319,760
	Attributable to non-controlling interests	447,582		-	(393,558)	-
7.	Earnings per share
	(1) Basic earnings per share	RMB0.98				RMB(1.73)
	(2) Diluted earnings per share	RMB0.98				RMB(1.73)

- 39 -

INCOME STATEMENT
									RMB in thousands
				Three months ended		Three months ended
Item				30 September 2019		30 September 2018
			Consolidated	Company	Consolidated	Company
				(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
									(Restated)	(Restated)
1.	Operating revenue	19,631,479		16,298,563		19,332,409		15,119,171
	Less:	Operating costs	12,474,037		14,632,844		12,274,393		12,565,396
		Taxes and surcharges	133,194		25,842		109,645		39,598
		Selling and distribution costs	1,664,953		1,438,438		1,911,540		901,265
		Administrative expenses	982,019		829,709		543,965		209,133
		Research and development costs	2,887,634		538,289		3,465,205		516,243
		Finance costs	(122,675)	(556,636)	(392,979)	(702,959)
		Including: Interest expenses	403,628		202,275		260,904		130,740
		Interest income	191,302		169,386		116,633		24,992
	Add:	Other income	628,162		309,250		703,733		111,998
		Investment income	303,442		5,949,735		(299,814)	(197,708)
		Including: Share of losses of
		associates and joint	(81,436)	(48,707)
		ventures	(264,680)	(220,267)
		Loss on derecognition
		of financial assets at	(18,499)	(6,670)
		amortised cost	(48,747)	(26,848)
		Gains/(Losses) from changes in	(281,252)	(157,433)
		fair values	(381,996)	(15,539)
		Credit impairment losses	(699,022)	(452,483)	(270,129)	(166,495)
		Asset impairment losses	(711,253)	(678,198)	(109,839)	50,210
		Gain from asset disposal		2,687,413		2,687,413			-		-
2.	Operating profit	3,539,807		7,048,361		1,062,595		1,372,961

	Add:	Non-operating income	69,273		41,108		25,737		12,636
	Less:	Non-operating expenses		30,440		1,516			211,290		133,770
3.	Total profit		3,578,640		7,087,953			877,042		1,251,827
	Less:	Income tax	585,258		423,522		328,642		8,584

4.	Net profit	2,993,382		6,664,431		548,400		1,243,243
	Analysed by continuity of operations

	2,993,382		6,664,431
	Net profit from continuing operations			548,400		1,243,243
	Attributable to holders of ordinary	2,657,151		6,576,564
	shares of the parent			564,467		1,138,401
	Attributable to holders of perpetual	87,867		87,867
	capital instruments			104,842		104,842
	Non-controlling interests	248,364		-	(120,909)	-

- 40 -

						RMB in thousands
		Three months ended		Three months ended
Item		30 September 2019		30 September 2018
		Consolidated	Company	Consolidated	Company
		(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
						(Restated)	(Restated)
5.	Other comprehensive income, net of tax	13,726		533	2,465		129
	Other comprehensive income attributable
	to holders of ordinary shares of the
	parent, net of tax	(5,247)	533	2,465		129
	Other comprehensive income that will be
	reclassified to profit and loss in
	subsequent accounting periods
	Exchange differences on translation of
	foreign operations	(5,247)	533	2,465		129

		(5,247)	533	2,465		129
	Items of other comprehensive income, net

	of tax	(5,247)	533	2,465		129
	Other comprehensive income attributable
			-
	to non-controlling interests, net of tax	18,973			-	-

6.	Total comprehensive income	3,007,108		6,664,964	550,865		1,243,372
	Attributable to holders of ordinary


	shares of the parent	2,651,904		6,577,097	566,932		1,138,530
	Attributable to holders of perpetual
	capital instruments	87,867		87,867	104,842		104,842
	Attributable to non-controlling interests	267,337		-	(120,909)	-
7.	Earnings per share
	(1) Basic earnings per share	RMB0.63			RMB0.14
	(2) Diluted earnings per share	RMB0.63			RMB0.14

- 41 -

CASH FLOW STATEMENT
			RMB in thousands
	Nine months ended	Nine months ended
Item	30 September 2019	30 September 2018
	Consolidated	Company	Consolidated	Company
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

1. Cash flows from operating activities Cash received from sale of goods or

	rendering of services	67,508,954			62,538,417			66,923,382			61,357,177
	Refunds of taxes	3,725,690			2,636,683			5,555,111			3,685,892
	Cash received relating to other operating	4,202,373			1,507,676
	activities					5,486,476				3,981,528
	Sub-total of cash inflows	75,437,017			66,682,776			77,964,969			69,024,597

	Cash paid for goods and services	47,301,603			52,397,820			49,485,605			62,385,691
	Cash paid to and on behalf of employees	11,894,111			3,680,377			17,654,647			7,267,823
	Cash paid for various types of taxes	6,511,273			2,451,682			4,936,980			1,122,103
	Cash paid relating to other operating	6,824,802			5,675,798
	activities					16,110,631				12,831,173
	Sub-total of cash outflows	72,531,789			64,205,677			88,187,863			83,606,790
	Net cash flows from operating activities	2,905,228			2,477,099			(10,222,894)	(14,582,193)


2.	Cash flows from investing activities	1,633,031			651,851						-
	Cash received from sale of investments					2,269,428
	Cash received from return on investment	207,673			401,698			443,663			394,537
	Net cash received from the disposal of
	fixed assets, intangible assets and	1,871,183			1,865,284
	other long-term assets					25,515				24,757
	Net cash received from the disposal of	445,907			-	-	-
	subsidiaries and other operating units
	Sub-total of cash inflows	4,157,794			2,918,833			2,738,606			419,294

	Cash paid for acquisition of fixed assets,
	intangible assets and other long-term	5,084,925			3,176,096
	assets					3,158,053				1,045,155
	Cash paid for acquisition of investments	218,278			83,405			1,950,910			340,746
	Cash paid relating to other investing	2,200,000			2,200,000			-	-
	activities
	Sub-total of cash outflows	7,503,203			5,459,501			5,108,963			1,385,901

	Net cash flows from investing activities	(3,345,409)	(2,540,668)	(2,370,357)	(966,607)

- 42 -

							RMB in thousands
			Nine months ended		Nine months ended
Item			30 September 2019		30 September 2018
		Consolidated		Company	Consolidated	Company
			(Unaudited)		(Unaudited)		(Unaudited)	(Unaudited)
3.	Cash flows from financing activities	423,799	419,229					-
	Cash received from investments	280,611
	Including: Capital injection into
	subsidiaries by minority	4,570		-					-
	shareholders		280,611
	Cash received from borrowings	36,208,907	20,152,831	19,376,927			12,399,556
	Cash received relating to other financing		26,280		-		-		-
	activities
	Sub-total of cash inflows		36,658,986		20,572,060		19,657,538			12,399,556
	Cash repayment of borrowings	24,808,179	16,978,566	21,899,142			9,247,312
	Cash paid for perpetual capital		-		-
	instruments			1,500,000			1,500,000
	Cash payments for distribution of	2,284,614	1,097,996
	dividends or for interest expenses	1,304,845			818,859
	Including: Distribution of dividends and
	profits by subsidiaries to	480,581		-					-
	minority shareholders		195,782
	Cash paid relating to other financing		868,532		92,067		-		-
	activities
	Sub-total of cash outflows	27,961,325	18,168,629	24,703,987			11,566,171

	Net cash flows from financing activities	8,697,661	2,403,431	(5,046,449)	833,385

4. Effect of changes in foreign exchange rate

	on cash and cash equivalents	373,420	333,796	(151,794)	170,212

5.	Net increase in cash and cash equivalents	8,630,900	2,673,658	(17,791,494)	(14,545,203)
	Add: cash and cash equivalents at the

	21,134,111	10,147,946
	beginning of the period	30,109,268	17,006,734

6. Net balance of cash and cash equivalents

at the end of the period	29,765,011	12,821,604	12,317,774	2,461,531

By Order of the Board

Li Zixue

Chairman

Shenzhen, the PRC

28 October 2019

As at the date of this announcement, the Board of Directors of the Company comprises three executive directors, Li Zixue, Xu Ziyang, Gu Junying; three non-executive directors, Li Buqing, Zhu Weimin, Fang Rong; and three independent non-executive directors, Cai Manli, Yuming Bao, Gordon Ng.

- 43 -

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ZTE Corporation published this content on 28 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2019 10:16:21 UTC

End-of-day quote Shenzhen S.E. Other stock markets 03:30:00 14/05/2024 am IST			5-day change	1st Jan Change
28.69 ^CNY	+0.35%		+0.99%	+8.35%

09/05	Ying Li Extends Loan Agreement with China Everbright Finance	MT
09/05	US could ban Chinese connected vehicles or impose restrictions	RE

Ying Li Extends Loan Agreement with China Everbright Finance	09/05	MT
US could ban Chinese connected vehicles or impose restrictions	09/05	RE
US could ban Chinese connected vehicles or impose restrictions, US commerce secretary says	09/05	RE
US Communication Watchdog to Ban Wireless Equipment from Chinese Telecommunication Firms	03/05	MT
More funds needed for US telecoms to remove Chinese equipment, says FCC	03/05	RE
Many US telecom firms need more funding to replace Huawei and ZTE equipment, FCC says	02/05	RE
US moves to bar Huawei, other Chinese telecoms from certifying wireless equipment	01/05	RE
Agency bars Chinese telecom carriers from offering US broadband services	25/04	RE
Net neutrality rules to be restored in US agency vote	25/04	RE
US agency to vote to restore net neutrality rules	25/04	RE
ZTE Corporation Reports Earnings Results for the First Quarter Ended March 31, 2024	25/04	CI
Ying Li Returns to Profit in 2023 as Revenue Rises 25.5%	15/04	MT
China Telecom Research Institute, ZTE Corporation and Yangtze Optical Fibre and Cable Joint Stock Limited Company Jointly Set World Record for Real-Time Transmission of over 120Tbit/s on A Single Fibre in S+C+L Band	11/04	CI
Ying Li International Appoints Acting CEO	04/04	MT
Telecom sector opposes US plan to reinstate net neutrality rules	04/04	RE
FCC to vote to restore net neutrality rules, reversing Trump	03/04	RE
Jefferies Downgrades ZTE to Underperform From Buy, Adjusts Price Target to HK$10.30 From HK$23.22	02/04	MT
Ying Li International, Indirect Unit Secure Loans from China Everbright Subsidiaries	12/03	MT
Jefferies Adjusts ZTE Corp.’s Price Target to HK$23.22 From HK$24.97, Keeps at Buy	11/03	MT
Nomura Adjusts ZTE Corp’s Price Target to HK$23 From HK$32.50, Keeps at Buy	11/03	MT
ZTE's 2023 Profit Rises on Higher Revenue	11/03	MT
ZTE's Profit Rises as Margins Improve	11/03	DJ
Zte Corporation Announces Final Dividend for the Year Ended 31 December 2023	08/03	CI
ZTE Corporation Reports Earnings Results for the Full Year Ended December 31, 2023	08/03	CI
China's Huawei and Amazon in patent licencing agreement	05/03	RE

	1st Jan change	Capi.
ZTE CORPORATION	+8.35%	17.66B
CISCO SYSTEMS, INC.	-3.11%	197B
ARISTA NETWORKS, INC.	+33.18%	97.1B
FOXCONN INDUSTRIAL INTERNET CO., LTD.	+57.41%	65.92B
MOTOROLA SOLUTIONS, INC.	+15.32%	59.71B
GARMIN LTD.	+32.18%	32.53B
NOKIA OYJ	+19.82%	21.04B
ZHONGJI INNOLIGHT CO., LTD.	+46.51%	18.65B
ERICSSON	-1.89%	18.08B
JUNIPER NETWORKS, INC.	+16.82%	11.21B

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