Xiaomi has legally won its battle against a US government move that sought to ban investment in the Chinese company and could’ve forced American investors to divest their holdings. The restrictions were supposed to go into effect next week, but a federal court has blocked the US government’s bid to put an investment ban on the company – something that could’ve done ‘irreparable damage’ in Xiaomi’s own words.
U.S. District Judge Rudolph Contreras has temporarily blocked the investment ban, adding that the company will likely get permanent relief as the case proceeds. Following the court ruling, Xiaomi now seeks another court ruling that will declare the designation of being called a ‘Chinese military company’ unlawful and permanently remove it, reports Bloomberg.
U.S. District Judge Rudolph Contreras in Washington, D.C., said on Friday that the court “concludes that defendants have not made the case that the national security interests at stake here are compelling.”
A brief history of events
The US Department of Defense added Xiaomi to its list of “Communist Chinese military companies” and by the virtue of an executive order signed by former President Donald Trump, it sought an investment ban on Xiaomi. As per the order, American companies were supposed to divest their holdings in Xiaomi, with the Chinese company even facing the risk of being de-listed from US exchanges.
Xiaomi called the move unlawful and unconstitutional, stressing that it is not controlled by – or affiliated with – the Chinese military, and that it offers products and services solely intended for civilian and commercial use. The US Department of Defense, on the other hand, argued that Xiaomi supports the Chinese military by providing it advanced technology and expertise while operating as a private company.
Did an award received by Xiaomi CEO trigger the avalanche?
Another report that surfaced earlier this week mentioned that an award received by Xiaomi founder and CEO Lei Jun may have partly been responsible for the US government’s action. Jun was honored with the Outstanding Builder of Socialism with Chinese Characteristics award in 2019 from China’s Ministry of Industry and Information Technology (MIIT).
Now, as per the US Department of Defense, MIIT supports the People’s Liberation Army (PLI) by helping it gain access to advanced technology and supports what it calls China’s Military-Civil Fusion development strategy.