UPDATE: Following the information that the US added Xiaomi to the investment blacklist, the company issued a response. Xiaomi denies connections to the Chinese military. Xiaomi said that it is “not owned, controlled, or affiliated with the Chinese military, and is not a “Communist Chinese Military Company” defined under the NDAA”. You can read a full statement by clicking here, as Xiaomi issued it to Android Authority.
ORIGINAL ARTICLE: The United States Department of Defense has added nine Chinese companies, including smartphone maker Xiaomi, to an investment blacklist. The US Government alleges that these companies have ties to the Chinese military. The Defense Department terms such companies as “Communist Chinese military companies” operating directly or indirectly in the United States.
These actions are per the statutory requirement of Section 1237 of the National Defense Authorization Act for Fiscal Year 1999. The law requires the Defense Department to compile a list of companies owned or controlled by the Chinese military.
The Department started acting on the law only last year and had added 35 companies so far. The latest addition takes the total number of blacklisted Chinese firms to 44, which also includes firms from aerospace, chemical, and several other industries. Prominent names previously placed on this investment blacklist include Huawei and SMIC.
In November last year, President Trump signed an executive order barring American firms from investing in any companies on the Defense Department’s list of Communist Chinese military companies. As a result, all the firms on this list will be subject to a new US investment ban. American companies investing in those firms will need to divest their holdings by November 11, 2021.
The US adds Xiaomi to its investment blacklist
Although President Donald Trump is on the last few days of his term in the office, his crackdown on Chinese companies, or China as a whole, is showing no means of a slowdown. The Trump administration has already effectively kicked Huawei out of the global smartphone scene by placing it on the Commerce Department’s Entity List back in 2019.
This bars the Chinese company from conducting any business with American companies. Recent reports suggest that the beleaguered Chinese giant, who briefly was the world’s largest smartphone vendor last year, could slip down all the way to the seventh position this year.
Another Chinese smartphone maker Xiaomi was reaping benefits from its compatriot’s misery. The company had surpassed Apple to become the third-largest smartphone maker in Q3, only behind Samsung and Huawei. However, the latest actions of the Department of Defense may now spell trouble for Xiaomi as well.
It’s unclear how this ban would affect Xiaomi. It’s not an outright trade ban, like the one on Huawei, so it won’t affect the company’s supply chain. But Xiaomi may lose a significant amount of investors by the end of this year. Qualcomm Ventures is one of the known American companies investing in the company. It now remains to be seen how the story develops and how Xiaomi responds.