GUANGZHOU, China – The Trump administration has blacklisted smartphone maker Xiaomi on suspected Chinese military companies.
The Chinese company’s Hong Kong-listed shares fell 10.6% on the news when it opened on Friday.
Beijing-based Xiaomi was the third largest smartphone maker in the world in the third quarter of 2020, according to Counterpoint Research.
The move means Xiaomi is now subject to a November regulation preventing American investors from buying stocks or related securities of companies named by the Department of Defense as a Chinese military company.
Trump’s original executive order was subsequently expanded to force investors to sell or sell affected holdings by November 11 of this year.
The company is listed in Hong Kong, not the United States
“The Ministry is determined to highlight and combat the People’s Republic of China (PRC) military-civil fusion development strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by ensuring access to advanced technology and expertise acquired and developed by Even those companies, universities and research programs in the PRC that appear to be civil entities, “the DOD said in a statement.
Xiaomi is one of nine entities called “Communist Chinese Military Enterprises”. Comac, a Chinese aircraft manufacturer, is also on the list.
Xiaomi denies military ties
Xiaomi hit back in the US on Friday, saying it was not affiliated with China’s military.
“The company affirms that it provides products and services for civil and commercial purposes. The company confirms that it is not owned, controlled by, or affiliated with the Chinese military and is not a ‘Chinese Communist Military Company’ as defined by the NDAA is, “Xiaomi said.
Everything is at stake for Xiaomi now. Because of the blacklist, it is now viewed as a US national security threat.
Center for the innovation of the future
NDDA refers to the National Defense Authorization Act of 1999, the piece of legislation that the US used to designate Xiaomi as a Chinese military company.
Xiaomi said it would “take appropriate measures to protect the interests of the company and its shareholders”.
The DOD published its first list of companies in June 2020. Companies like Chinese tech giant Huawei and semiconductor maker SMIC are also on the list.
“Everything is at stake for Xiaomi now,” Abishur Prakash, geopolitical specialist at the Center for Innovating the Future (CIF), a Toronto-based consulting firm, told CNBC via email.
“The blacklisting makes it a US national security threat. This can have an impact on its global strategy, from expanding into markets like India to hiring western talent to launching new products in Africa.”