Chinese electronics company Xiaomi has been added to a blacklist by the US Department of Defense following its classification as a "Communist Chinese military company."
As CNBC reports, Xiaomi is one of nine new companies added to the list "in accordance with the statutory requirement of Section 1237 of the National Defense Authorization Act for Fiscal Year 1999, as amended." The Department of Defense press release explains how this is part of its ongoing work "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 other companies newly classified as owned by the Chinese military are:
- Advanced Micro-Fabrication Equipment Inc. (AMEC)
- Luokong Technology Corporation (LKCO)
- Beijing Zhongguancum Development Investment Center
- GOWIN Semiconductor Corp.
- Grand China Air Co. Ltd. (GCAC)
- Global Tone Communication Technology Co. Ltd. (GTCOM)
- China National Aviation Holding Co. Ltd. (CNAH)
- Commercial Aircraft Corporation of China, Ltd. (COMAC)
The military blacklist carries fewer restrictions and is different to the entity list, which most prominently includes Huawei. However, it does mean that US investors only have until Nov. 11 this year to divest any holdings they have in Xiaomi, which currently counts as the third-largest smartphone manufacturer.
As TechCrunch reports, in response Xiaomi issued a statement saying, "it 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 will take appropriate course of actions to protect the interests of the company and its shareholders ... The company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the group. The company will make further announcements as and when appropriate."
For now, the biggest impact seems to be on Xiaomi's share price, which fell 11 percent on the news. The company's operations and access to technology remain unaffected in the short term, but investors being forced to pull out could certainly hamper the company in the medium term. What's also unclear is whether further action may be taken against Xiaomi in future, especially as the US transitions to a new president next week.