In January this year, the US government put Xiaomi on a military blocklist, seeking to ban American investment. In just over four months, the decision has been overturned, in an unsurprising turn of events. The District of Columbia court has issued an order to remove Xiaomi’s name from the military blocklist.
The “Communist Chinese Military Companies” list is maintained by the US Department of Defense. Xiaomi’s inclusion also meant existing American stakeholders had to divest their holdings in Xiaomi. Here’s what the US Department of Defense said in a statement back then:
“The Department is determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities.”
The US government’s move stirred some intense debate regarding the background and whether it would stand a legal challenge. Experts were quick to argue that Xiaomi will win the case if it goes to court, and the company actually filed a lawsuit soon after the inclusion on the military blocklist.
— Xiaomi (@Xiaomi) May 26, 2021
Xiaomi argued that it complies with all the relevant laws and regulations for doing business and that the blocklisting would cause irreparable damage to the company. More importantly, the Chinese electronics giant made it clear that it is not affiliated with the Chinese military, which was the whole backbone of the US government’s move.
It was subsequently reported that an award received by Xiaomi co-founder and CEO Lei Jun was partly responsible for the company being put on the military blocklist. China’s Ministry of Industry and Information Technology (MIIT), the regulatory authority behind the award, oversees China’s Military-Civil Fusion development strategy, as per the US Department of Defense.
About two months later, a federal court blocked the US government’s bid to put an investment ban on the company just before the restrictions were supposed to effect. After getting legal relief, Xiaomi asked the court to declare its inclusion on the military blocklist unlawful and demanded a permanent removal.
Now that Xiaomi is no longer classified as a ‘Communist Chinese Military Company’ by the US government, all restrictions on American investment in the company have been lifted. After winning the court battle, the company has again stressed that it is an independently operated and managed corporation.
Fellow Chinese company HUAWEI is already on the blocklist. But unlike Xiaomi, things are not going to get easy for HUAWEI even after the change in the White House leadership. And unlike Xiaomi, HUAWEI is now putting in more resources and efforts in developing a software ecosystem after bleeding money from its hardware division following the imposition of US trade sanctions.