What just happened? As Donald Trump approaches the end of his term, the president is putting the pressure on a Chinese giant—but this time, it’s not Huawei. The outgoing administration has designated Xiaomi, the world’s third best-selling phone maker, a ‘Communist Chinese military company,’ adding it to a blacklist that could force U.S. investors to divest.
As noted by Reuters, a 1999 law requires the Defense Department to compile a catalog of companies owned or controlled by the People’s Liberation Army. The Pentagon has added 35 companies so far, including chipmaker SMIC.
Huawei is on the list, too, due to its telecoms infrastructure business that is worrying some governments.
Both Huawei and SMIC are also part of the US Commerce Department’s ‘entity list’, which prevents American organizations from exporting to the blacklisted companies without a government license. Hence the lack of Google Apps and U.S. hardware in the latest Huawei phones.
The newly added companies will be subject to an investment ban that forces American investors to divest their holdings on November 11, 2021—assuming the Biden administration doesn’t overturn the order.
Xiaomi, which was accused of recording users’ incognito web browsing last year, currently takes the third-largest share of the global smartphone market, sitting behind number one Samsung and second-place Huawei, according to IDC.
Xiaomi, in a statement to The Verge, said that it is “operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses.” The spokesperson contends that Xiaomi “is not owned, controlled or affiliated with the Chinese military, and is not a ‘Communist Chinese Military Company’ defined under the NDAA [National Defense Authorization Act].”
The company is reviewing the consequences of the designation before taking action.