By Eurasia Business News – May 12, 2021

After judicial proceedings, the US Government will remove the Chinese smartphone maker from its blacklist – Xiaomi’s shares rose 6.5% following the news.

View on Shanghai at night, China. – Photo credit : Pixabay.

The US Department of Defence has agreed to remove the Chinese Xiaomi Corporation from the US blacklist, reports Bloomberg. This status decided under the President Donald Trump banned American investments in Xiaomi.

The Pentagon under former US President Donald Trump issued an order on January 14, 2021, according to which Xiaomi was called a “communist Chinese military structure.” In early 2021, the smartphone maker sued the US government before a US Court.

The retreat of the US Department of Defence comes two months after Xiaomi won in a federal lawsuit challenging its listing on the blacklist, in which a judge from Washington, D.C., criticized the Pentagon’s rationale for the decision and ordered a temporary halt against its enforcement.

The US sanctions are related to a legislation adopted in 1999 (Section 1237 of the National Defence Authorization Act for Fiscal Year 1999), according to which the US Department of Defence compiles a list of companies associated with the Chinese military.

In November 2020, Donald Trump, then the US president, signed a decree prohibiting US companies and private investors from owning shares in more than 30 Chinese companies, which, according to the White House, are suppliers of the Chinese defence industry, as well as the Chinese intelligence services. This blacklist was updated on January 14, 2021, and Xiaomi Corporation was included in it along with eight other Chinese companies.

The Pentagon justified its decision by the fact that the founder of Xiaomi, Lei Yong, received an award in 2019 from the China’s Ministry of Industry and Information Technology. In addition, the US department expressed concern about the company’s large investments in 5G technology and artificial intelligence.

Xiaomi had said it did not agree with the decision. The company has denied any connection with the Chinese military industry and has assured that it will take measures to protect the interests of its shareholders in response to the sanctions.

Lawyers for both Xiaomi and the Pentagon agreed during the legal proceedings before Court that the company’s removal from the blacklist was appropriate, following the judge’s order.

“The parties agreed on further actions that will allow the court dispute to be completed,” according to the court documentation.

 The parties are now discussing the conditions for resolving the dispute and will release a statement by May 20. 

On the back of the news, Xiaomi shares on the Hong Kong stock exchange rose 6.1% to HK $ 26.1 per share on May 12, at 16:08 UTC+8.

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