Xiaomi Sues U.S. Seeking to Reverse Investment Ban

Xiaomi Corp. sued the U.S. Defense and Treasury departments, challenging a blacklisting that blocks American investors from buying the Chinese smartphone giant’s securities.

The lawsuit came after the Defense Department determined earlier this month that China’s biggest smartphone maker was affiliated with the People’s Liberation Army. Beijing-based Xiaomi called the blacklisting “unconstitutional” and seeks a court ruling to reverse the designation, which was made in the waning days of the Trump administration.

“Xiaomi faces imminent, severe, and irreparable harm if the Designation remains in place and the restrictions take effect,” the company said in the filing in the U.S. district court of Columbia. The lawsuit also named Defense Secretary Lloyd Austin and Treasury Secretary Janet Yellen as defendants.

Under former President Donald Trump, the U.S. had targeted scores of Chinese tech companies citing national security. Huawei Technologies Co., one of the biggest rivals to Xiaomi in smartphone market, was cut off from its key suppliers as a result of a series of restrictions imposed by the former administration. Chinese chipmaking giant Semiconductor Manufacturing International Corp., Shenzhen-based drone maker SZ DJI Technology Co. are also among the companies that have been blacklisted.

BlackRock Inc., the Vanguard Group Inc. and State Street Corp. are among the top American institutional investors in Xiaomi that would be forced to divest holdings in the company by November, according to the filing. U.S. chip maker Qualcomm Inc. was also one of the earliest investors in Xiaomi, which was co-founded by billionaire Lei Jun a decade ago. Xiaomi’s shares dropped 12% in January after reaching all-time highs in the first week of the year.

“Xiaomi is not owned or controlled or otherwise affiliated with the Chinese government or military, nor is it owned or controlled by any entity affiliated with the Chinese defense industrial base,” the smartphone maker said in the filing.

©2021 Bloomberg L.P.

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