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Xiaomi denies allegations of links with the Chinese military, but the company’s shares plummet
fifteen.01.2021 [13:01],
Vladimir Mironenko

On Thursday, it became known about the inclusion by the US Department of Defense of the Chinese electronics manufacturer Xiaomi in the blacklist of companies allegedly associated with the Chinese military. With this move, the outgoing Trump administration attempted to further exacerbate tensions with Beijing, escalating the crackdown on Chinese corporate interests.

Reuters

Prior to this, the State Department blacklisted China’s leading chip manufacturer SMIC (Semiconductor Manufacturing International Corp.) to restrict his business with American suppliers and force American investors to sell the company’s existing shares.

According to the Nikkei resource, Xiaomi’s blacklisting is due to the fact that the company is rapidly gaining momentum in the global market. It surpassed Apple for the first time to become the third-largest smartphone maker in the world in terms of shipments in the third quarter of last year, for the first time in 10 years ousted the American tech giant from the top three. As Nikkei previously reported, the Chinese manufacturer has also placed significant orders with its suppliers in hopes of capturing market share that Huawei has lost due to US sanctions.

Commenting on the blacklisting, Xiaomi said on Friday that it is “not owned, controlled or affiliated with the Chinese military,” stressing that it does not fit the definition of a Chinese military company under US law.

US President Donald Trump issued a decree last November, effective January 11, prohibiting “any entity of the United States” from holding securities directly or through funds in companies with ties to the Chinese military. Investors who already own such assets will have to get rid of them by November 2021. Thus, Xiaomi is only threatened with delisting from American exchanges and blocking of American investments, but not an exception from the Google Android ecosystem, as happened with Huawei.

Xiaomi is listed on the Hong Kong Stock Exchange and several top US funds such as Vanguard Group, BlackRock Institutional Trust Company, Wells Capital Management and Geode Capital Management are among its top investors. Its stock price fell 13% in Friday morning trading.

According to GF Securities analyst Jeff Pu, the blacklisting will not immediately affect Xiaomi’s business, but will limit the flow of American capital to the Chinese electronics manufacturer.