UPDATE 1-China hopes ZTE will be treated fairly in US probe

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* China rejects "groundless" criticism of relations with Iran

BEIJING, July 17 (Reuters) - China's Ministry of Commerce said on Tuesday it hoped telecom equipment maker ZTE Corp , subject of an FBI probe into the sale of banned U.S. computer equipment to Iran, would receive fair and proper treatment from the United States.

The U.S. investigation stems from a Reuters report in March that Shenzhen-based ZTE sold Iran's largest telecoms firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications, the Smoking Gun website reported.

"We hope it (ZTE) will receive objective, fair and proper treatment from the U.S.," Commerce Ministry spokesman Shen Danyang told a regular news conference organised to discuss inward investments into China.

The FBI probe presents new troubles for ZTE - the world's fifth-largest telecoms equipment maker - in the United States, where it has been trying to expand its operations.

The firm is also under investigation by the U.S. House of Representatives' Intelligence Committee over whether its equipment represents a threat to national security.

ZTE is China's second-largest telecoms equipment maker and also the world's fourth-largest mobile device maker with 4.2 percent global market share in the first quarter, according to technology research firm Gartner. ZTE is publicly traded and its largest shareholder is a Chinese state-owned enterprise.

ZTE's Hong Kong-listed shares rose 0.2 percent to HK$10.48 by mid-morning on Tuesday, a day after they took a heavy tumble on a profit warning and news of the FBI probe.

Commerce Ministry spokesman Shen added that groundless criticism of China's relations with Iran was unfair.

"China, like many other countries in the world, has kept normal, open and transparent relations with Iran and we think these relations do not go against the rules of the United Nations and should not receive groundless criticism from other countries," Shen said.

China-U.S.

">* China rejects "groundless" criticism of relations with IranBEIJING, July 17 (Reuters) - China's Ministry of Commerce said on Tuesday it hoped telecom equipment maker ZTE Corp , subject of an FBI probe into the sale of banned U.S"relations have been tested over Washington's sanctions against Iran. The United States wants to pressure Iran to curb its nuclear program, accusing Tehran of trying to develop nuclear weapons. Iran denies this, saying its nuclear program is for peaceful purposes, such as power generation.

The United States avoided a row with Beijing last month when it granted China a six-month reprieve from financial sanctions that would have hurt Iran's trading partners.

China buys up to a fifth of Iran's oil exports. President Barack Obama's administration has now spared all 20 of Iran's major oil buyers from its unilateral sanctions.

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