Xiaomi Corp. (OTC: XIACF; HKEX: 01810) is now suing the U.S. over claims that it has ties to the Chinese military. As a result, the Chinese smartphone giant is seeking removal from Washington’s blacklist that forbids the company from doing business with American firms.
In a lawsuit filing Friday against the U.S. treasury and defense departments in the district court of Columbia, the company claimed that the Chinese military label is “unconstitutional because it deprives Xiaomi of its liberty and property rights without due process of law,” as cited by CNBC.
If the blacklisting goes into effect, American investors will no longer be able to purchase securities and will be forced to divest their holdings in Xiaomi by November. Xiaomi warned that its growth could be stunt if American investors are no longer able to buy its stock.
“By cutting off Xiaomi from U.S. capital markets, the Designation and related restrictions will damage the company’s ability to conduct, grow and finance its business, sell its products, maintain and grow its business relationships, and recruit and retain employees,” Xiaomi alleged in the lawsuit filing.
The targeted blacklisting happened under Donald Trump’s administration in mid-January. Along with Xiaomi, the administration alleged that 10 other Chinese companies had ties to the nation’s military.
The Trump administration has also targeted Chinese telecom giants China Telecom (HKEX: 00728), China Mobile Ltd. (HKEX: 00941), and China Unicom (HKEX: 00762), for alleged links to the Chinese military. The New York Stock Exchange wound up delisting all three after some confusion on the matter.
While it’s unclear what type of approach the new administration will take on China, President Joe Biden could potentially reverse the ban on Xiaomi.
Meanwhile, Gina Raimondo, Biden’s nominee to lead the Commerce Department pledged in late January to protect American telecommunication networks from Chinese tech giants including ZTE Corp. (OTC: ZTCOY; HKEX: 00763) and Huawei Technologies.
“I would use the full toolkit at my disposal to the fullest extent possible to protect Americans and our network from Chinese interference or any kind of back door influence,” she said, in a testimony before the U.S. Senate Commerce Committee.
At the close of trading in Hong Kong Monday, Xiaomi was trading up 2% at HK$29.80 per share. Shares are down 9% since mid-January.