Xiaomi sues US government after blacklisting
Donald Trump had anticipated Chinese tech companies in his presidential period: Huawei and ZTE were hit hard and Huawei is still feeling the consequences. Xiaomi is one of the last parties to be hit by the US: it was placed on the ‘military blacklist’. Xiaomi is now appealing against this.
Xiaomi on blacklist
Just before Trump left the White House, the US Department of Defense put Xiaomi on the ‘Military blacklist’. Companies that end up on this blacklist are no longer allowed to issue shares to American companies and must take back the shares that are currently outstanding with parties in the US. The reason behind this strict light line is that companies on this list may be affiliated with the Chinese military. Xiaomi announced earlier this month that it is not affiliated with the Chinese army.
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In response, Xiaomi went on to say it would ‘take action’ to protect investor interests as well as the interests of the company as a whole. What ‘actions’ Xiaomi would take to further these interests remained unknown at first. A report from Bloomberg shows the full picture this time, including a lawsuit filed by Xiaomi against the US Department of Defense and Treasury. With the lawsuit, Xiaomi hopes to be removed from the blacklist.
On to Entity List
Should the court rule in favor of the US government, it will have “serious and irreparable” consequences for Xiaomi. The exact consequences Xiaomi will experience if no changes are made, the company leaves in the middle. You can think of the consequences for ‘previous parties’ that were imposed a blockade by the Ministry of Defense.
Huawei was previously placed on the Entity List by Trump and has been having trouble obtaining components ever since. Furthermore, the Chinese SMIC was blocked for the US, with the result that the company can not buy chip equipment with ‘American software or hardware’. Xiaomi is not yet on the Entity List, where the above companies are affected, and yet this is important to note. DJI, known for its drones, was first placed on the Military Blacklist, and was later transferred to the more general Entity List.
Consequences for the US
Whether the placement on the blacklist will stand after Xiaomi appears in court is difficult to determine. Experts speculate about a possible move away from the rigorous selection that took place by the old US government.
On the one hand, this has to do with the limited earnings of the government for blocking Xiaomi; in addition, the blockade has an impact on parties in the US. Qualcomm and Vanguard Group Inc. have invested heavily in Xiaomi. De-investing would be undesirable for these companies, as it would result in a loss of income.
