Xiaomi sues the US government over military blacklisting

1 Feb 2021

Image: © mehaniq41/Stock.adobe.com

The smartphone maker is the latest Chinese company butting heads with the US over claims of ties to Beijing.

Chinese smartphone maker Xiaomi is suing the US over its inclusion on a blacklist of Chinese companies.

Xiaomi, which is one of the world’s largest smartphone makers, was last month placed on a record of companies that the US deemed to have links to the Chinese military – a claim the company denies.

This bars American investors from holding shares in the company, subject to an executive order signed by former US president Donald Trump in November. Nine other companies were designated as ‘Communist Chinese military companies’ or CCMCs.

In its lawsuit filed last Friday (29 January) against the US Department of Defense and the US Treasury, Xiaomi said Trump’s designation was “unlawful” and presented no evidence.

“[By] failing to provide Xiaomi with notice of, or an opportunity to challenge, the basis for the designation, defendants have deprived Xiaomi of due process of law, in violation of the Fifth Amendment,” the lawsuit said.

“Defendants’ designation of Xiaomi as a CCMC is arbitrary and capricious because, among other things, defendants failed to articulate a reasonable explanation for their decision.”

Xiaomi claimed that the designation will damage the company’s ability to raise funds, sell products, and attract and retain US employees as some may hold shares in the company.

Under the order, US investors will no longer be able to buy shares in Xiaomi, which is listed in Hong Kong, from March of this year and existing shareholders must divest by January 2022.

The company denied that is “owned or controlled by, or otherwise affiliated” with the Chinese government or military.

The tiff between Xiaomi and the US bears similarities to the long-running feud between the US and Huawei. The Chinese telecoms equipment maker repeatedly denied allegations by the Trump administration that it is linked to Beijing and is a national security threat.

While Trump has left office, there are no immediate signs of the US-China tech tensions abating just yet. The Biden administration’s nominee for commerce secretary, Gina Raimondo, said she would protect US telecom networks from Chinese companies but stopped short of committing to retaining Huawei on blacklists. She is expected to be voted in on Wednesday.

Jonathan Keane is a freelance business and technology journalist based in Dublin