In response to blacklisting, Xiaomi sues the U.S. government

Xiaomi has become the latest Chinese tech company to be embroiled in a dispute with the U.S. government, although they are on a different blacklist than the infamous case of Huawei. The latter was blacklisted for alleged connections with the Chinese government, but Xiaomi—along with a number of other Chinese companies—has been accused of having connections with the Chinese military.

This also means that the consequences are different, with the blacklisting prohibiting U.S. investment into firms on the blacklist. As such, American investors need to sell of their stock in Xiaomi by the 11th of November 2021, which will see a significant drop in the company’s value. At the time, the Chinese company maintained that it is “not owned, controlled, or affiliated with the Chinese military”.

Xiaomi: Decision is “unlawful and unconstitutional”

In response, Xiaomi has filed a lawsuit against the U.S. government over the decision, calling the classification of the company as a CCMC (Communist Chinese Military Company) an “unlawful and unconstitutional” decision. The company denies this, and says that the American government has “zero evidence” to support the allegations.

Additionally, the lawsuit seeks for the court to set aside the CCMC designation, saying that the resulting restrictions “deprive Xiaomi of its property and liberty rights, including its rights to access U.S. capital markets”.

“Xiaomi received no notice of the Designation before it was published on January
14, 2021, nor did Xiaomi receive any explanation for the Designation, notice of any material on which the agencies relied, or any opportunity to respond and be heard on the Designation and the restrictions imposed by Executive Order 13959.”

As Gizmodo reports, alleged CCMCs are seen by the U.S. government as an integral part of China’s strategy to use civilian companies to support “military and intelligence activities”. These companies are also alleged to be exploiting American investors to access capital to help finance intelligence efforts for the Chinese military. The following excerpt from former U.S. President Donald Trump’s executive order explains this:

“Through the national strategy of Military-Civil Fusion, the PRC increases the size of the country’s military-industrial complex by compelling civilian Chinese companies to support its military and intelligence activities. Those companies, though remaining ostensibly private and civilian, directly support the PRC’s military, intelligence, and security apparatuses and aid in their development and modernisation.”

via Gizmodo

So, what’s next for Xiaomi? Ramifications on the company’s smartphone business might not be as severe as the case of Huawei, with Xiaomi to continue to have access to American companies. By this, of course, we’re referring to Google, and Google Mobile Services. Meanwhile, one of the strengths of Xiaomi’s range of products—including AIoT and Smart Home devices—is integration within the Google ecosystem.

However, only time will tell what the full effects of the executive order will be—for Xiaomi, and the other Chinese companies on the investment blacklist.

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