White House Agrees To Removes China's Xiaomi From Pentagon Trade Blacklist

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by Tyler Durden
Wednesday, May 12, 2021 - 01:40 PM

In what is being described as a "rare victory" for a Chinese technology giant entangled in a spat with the US government, it appears the Biden Administration has decided to end the persecution of Chinese smartphone maker Xiaomi, which had been targeted by the Trump Administration, along with a host of other Chinese firms, most notably telecoms titan Huawei.

A Joint Status Report released late Tuesday showed the DoD and Xiaomi had agreed to resolve ongoing litigation "without further contest". Xiaomi had sued the US government after the Pentagon placed it on a government blacklist, accusing it of having close ties to the Chinese military, though the Biden administration now believes that vacating that designation "would be appropriate."

“The parties have agreed upon a path forward that would resolve this litigation without the need for contested briefing,” according to the filing. A comprehensive "joint proposal" is expected to be filed before May 20.

A Xiaomi spokeswoman said the company is watching the latest developments closely, without elaborating.

Xiaomi sued the government earlier this year after the Pentagon issued an order designating the firm as having ties to the PLA, Chinese military, which would have led eventually to the firm's forceful de-listing from US exchanges and its expulsion from global equity benchmark indexes. The settlement isn't exactly a surprise: An American judge granted Xiaomi an injunction back in March to prevent "irreparable" harm to the company's business on the expectation that the Trump Administration's move would likely be over turned (the ruling also cited the US government's "deeply flawed" process for including it in the ban, according to US District Judge Rudolph Contreras, who oversaw the case ).

Unsurprisingly, Xiaomi shares surged more than 6% on the news in Hong Kong markets on Wednesday.

But the deal is just another example of how the Biden Administration is trying to walk a tightrope between the Biden family's longstanding business ties to China (which we learned some new details about just the other day) and the antagonistic approach to waging economic war against China pioneered by President Trump, which has proven to be enduringly popular among the American people.

Founded by billionaire entrepreneur Lei Jun more than 10 years ago, Xiaomi was seen as a unlikely target for Trump's scrutiny (the firm enjoyed the financial backing of American chip giant Qualcomm in its early years).

Along with TikTok and its owner ByteDance, Xiaomi was among the more high-profile Chinese companies targeted by President Trump. One academic quoted by Reuters said the settlement was an obvious move for the Biden Administration in its effort to correct the "excesses" of Trump's anti-China push.

Prof. Doug Fuller, who tracks China's semiconductor sector at the City University of Hong Kong, says that Xiaomi's win was "low-hanging fruit" for the Biden administration in its efforts to correct the excesses of Trump's China policy as his term ended.

"I think it is a sign that Biden will be a bit softer," he said.

"Calling Xiaomi a Chinese military company was always ridiculous. For firms tied to more legitimate defence concerns, or Xinjiang, however, it will be more difficult."

If the measures from the blacklist had ever taken effect, it would have crippled Xiaomi's business. Fortunately, the company has now dodged a major bullet.

Trump's crackdown on Chinese firms had the biggest impact on Huawei, and so far, at least, it doesn't look like the Biden Administration has any plans to lighten up on the Chinese telecoms equipment maker, even as many American allies in Europe ignored Washington's demands to completely exclude Huawei equipment from their 5G wireless networks.