GUANGZHOU, China — The Trump administration has added smartphone maker Xiaomi to a blacklist of alleged Chinese military companies.
Hong Kong-listed shares of the Chinese firm were down 10.6% at the open on Friday on that news.
Beijing-based Xiaomi was the world’s third-largest smartphone maker in the third quarter of 2020, according to Counterpoint Research.
The move means that Xiaomi is now subject to a November executive order restricting American investors from buying shares or related securities of any companies designated by the Department of Defense to be a Chinese military company.
Trump’s initial executive order was subsequently expanded to force investors to divest, or sell out, of affected holdings, by Nov. 11 this year.
The company is listed in Hong Kong and not in the U.S.
“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 DOD said in a statement.
Xiaomi is one of nine entities designated as “Communist Chinese military companies.” Comac, a Chinese aircraft manufacturer, is also on the list.
Xiaomi hit back at the U.S. on Friday and said it is not linked to China’s military.
“The Company reiterates that it provides products and services for civilian and commercial use. The Company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a ‘Communist Chinese Military Company’ defined under the NDAA,” Xiaomi said.
NDDA refers to the National Defense Authorization Act of 1999, the legislation which the U.S. used to designate Xiaomi as a Chinese military company.
Xiaomi said it will “take appropriate course of actions to protect the interests of the Company and its shareholders.”
The DOD released its initial list of companies in June 2020. Firms such as Chinese technology giant Huawei and semiconductor manufacturer SMIC, are also on the list.
“For Xiaomi, everything is now on the line,” Abishur Prakash, a geopolitical specialist at the Center for Innovating the Future (CIF), a Toronto-based consulting firm, told CNBC by email.
“By being blacklisted, it is now deemed a U.S. national security threat. This may affect its global strategy, from expanding into markets like India to hiring Western talent to launching new products in Africa.”