Pentagon Agrees To Remove Chinese Smartphone Giant Xiaomi From Trump-Era Blacklist - Forbes

https://ift.tt/2KSW0PQ

Topline

The U.S. Department of Defense (DOD) agreed to remove Chinese smartphone maker Xiaomi from a government blacklist on Tuesday night, Reuters reported citing court filings, in a move that reverses a key Trump-era action and clears the decks for future American investment into the company.

Key Facts

According to the court filings, Washington officials and the phone maker have agreed to settle an ongoing lawsuit in which Xiaomi had challenged the blacklisting issued under former President Trump, meaning Xiaomi’s designation as a Communist Chinese military firm has been cleared.

According to CNBC’s report, Xiaomi and the DOD have agreed to negotiate the exact terms of their settlement and submit it to the court on or before May 20.

Xiaomi, which is listed in Hong Kong, saw its shares surge by over 6% in Wednesday’s trading following news of the decision.

Xiaomi is the third-largest smartphone manufacturer in the world by shipments, behind Samsung and Apple.

Forbes has reached out to Xiaomi for a comment on the decision.

Key Background

In the final days of the Trump presidency, the DOD designated Xiaomi as having ties with the Chinese military and placed it on a blacklist that restricted U.S. entities from investing in the company. Apart from Xiaomi, seven other Chinese companies—including chipmaker SMIC and state-owned aircraft maker Comac—were also placed under similar restrictions. Xiaomi reacted swiftly to the blacklisting by filing a lawsuit against the U.S. government and calling the move “unlawful and unconstitutional.” The phone maker has also vehemently denied having any links to the Chinese military. In March, a U.S. Court granted the company a preliminary injunction which said the company would “suffer irreparable harm in the form of serious reputational and unrecoverable economic injuries.” Following Xiaomi’s legal victory, other Chinese firms placed on the blacklist are considering similar lawsuits, according to Reuters.

Tangent

As tensions between the U.S. and China escalated last year, Trump moved to target several key Chinese firms in retaliation. Xiaomi’s local rival Huawei was also put under an export blacklist that prevented the company from sourcing U.S.-developed technology including chips and key software. The Trump administration also threatened to ban several Chinese-owned online platforms like TikTok and WeChat from the country although those efforts were also mired in legal issues. The Biden administration has continued to take a hawkish stance against China on several issues, like the alleged mistreatment of its Uyghur minority and suppression of dissent in Hong Kong. However, instead of targeting Chinese companies operating in the U.S., Biden officials have instead hit China with sanctions with backing from its European allies.

Crucial Quote

While the reversal of the Trump administration actions against Xiaomi may help lower trade tensions with China, Abishur Prakash, a geopolitical specialist at Toronto-based consulting firm Center for Innovating the Future notes that, “In strategic areas like chips and AI, it will be difficult for Biden to change gears (from Trump) without putting the US at a geopolitical disadvantage.”