The United States’ Department of Defense under outgoing US President Donald Trump has added nine Chinese companies to a blacklist of companies that are alleged to be working with the Chinese military. Smartphone maker Xiaomi is also a part of the list of nine companies that are alleged to be “Communist Chinese military companies,” operating either directly or indirectly within the United States. The ban on the nine Chinese companies including Xiaomi comes in accordance with the statutory requirement of Section 1237 of the National Defense Authorisation Act of 1999 in the US. Shares of Xiaomi opened 10.6 percent lower on the Hong Kong stock exchange on Friday on the news.
The department of Defense announced its list on Thursday. It is unclear how Xiaomi falls under the category of “Communist Chinese military companies, as the company has mostly stuck to making consumer products. In a statement to News18, a Xiaomi spokesperson said that the Company has been in compliance with law and operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses. “Xiaomi reiterates that it provides products and services for civilian and commercial use. The Company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a “Communist Chinese Military Company” defined under the NDAA. The Company will take appropriate course of actions to protect the interests of the Company and its shareholders.”
The Xiaomi spokesperson also said that the Company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the Group and will make further announcements as and when appropriate. It is unlikely that being added to this US blacklist will affect Xiaomi’s operations in India or impact the company’s supply chain.
According to Reuters, American investors will need to divest their holdings in each of the blacklisted firms by November 11, 2021. This is because of an executive order signed by President Donald Trump in November 2020, barring Americans from investing in any company that is added to the Department of Defense’s list. Companies previously placed on this blacklist include smartphone maker Huawei and chipmaker SMIC.
It is unclear what this means for Xiaomi’s future, as it is not an outright ban on trade. However, it is possible that company receives a large amount of investment from US-based companies. For example, Qualcomm had publicly invested in Xiaomi and hence, the company will need to divest its holdings by November 11. Fortunately for Xiaomi, this development does not affect the company’s supply chain.