One of the Trump administration’s last acts in mid-January was to declare Chinese smartphone maker Xiaomi a “Communist Chinese military company.” The ruling from the Department of Defense (which is different from the Department of Commerce’s export ban against Huawei) bans US citizens from holding Xiaomi stock or other investments starting March 15, 2021. This weekend, Xiaomi posted a response to the ruling, which came in the form of legal complaints to the US Defense and Treasury Departments.
Xiaomi’s complaint is now addressed to the new Biden-appointed Defense and Treasury secretaries, saying the decision was “factually incorrect and has deprived the company of legal due process.” Xiaomi calls the ruling “unlawful and unconstitutional,” denies being controlled by the Chinese military, and would like to see the decision reversed.
As Reuters reports, Xiaomi says that a “substantial number” of its investors are US citizens—including three of the top ten shareholders of ordinary shares—and that the ruling would cause “immediate and irreparable harm to Xiaomi.” The company continues, “Moreover, the public association of Xiaomi with the Chinese military will significantly impair the company’s standing with business partners and consumers, causing reputational harms that cannot be readily quantified or easily repaired.”
Xiaomi had an IPO in 2018 and today is one of the world’s most valuable smartphone companies, with a market cap of $96 billion. Until this ruling, Xiaomi had been a big winner in the government’s war against Huawei, picking up market share that was dropped by Huawei after the suffocating export ban. Worldwide, the IDC puts Xiaomi at number three in smartphone marketshare, behind Samsung and Huawei and ahead of Apple.