The Chinese Military Network Behind the World’s Third-Largest Cell Phone Maker
Xiaomi was blacklisted by the Trump administration as a military-owned company controlled by the CCP
Xiaomi, the world’s third-largest cell phone maker and China’s second-largest, denied its connections to the military after it was blacklisted by the Trump administration as a military-owned company controlled by the CCP, but a closer look at the background and connections of its founder and CEO, Lei Jun, led to the discovery of a huge and tightly interwoven network of ties with the Chinese Communist Party’s (CCP) military.
Xiaomi: Blacklisted and Denial
Donald Trump spent his last days in office blacklisting Beijing smartphone maker Xiaomi and other Chinese technology companies.
Not content to wait and see if the new administration of President Joe Biden overturns it, Xiaomi has decided to try its luck in court.
The world s third-largest smartphone maker brought the action on Friday in the US District Court for the District of Columbia, against Lloyd Austin s Department of Defense and Janet Yellen s Treasury.
Fight or flight: Xiaomi isn t taking Trump s farewell blacklisting lying down.
Trump s decision on January 14, four days before he left office, added Xiaomi to a list of Communist Chinese Military Companies under the 1999 National Defense Authorization Act s Section 1237.
Home Xiaomi sues US government over inclusion on Pentagon blacklist
Xiaomi sues US government over inclusion on Pentagon blacklist
Move instituted by Trump administration would bar Americans from investing in Chinese smartphone maker
World Economy News
30 Jan 2021 • 2 min read
Xiaomi, the Chinese smartphone maker, has sued the US government over a move by Donald Trump in his last week as president to place the company on a Pentagon blacklist that bars Americans from investing in it.
The group, which has overtaken Apple to become the third-biggest smartphone maker, filed a lawsuit against Lloyd Austin, the US defence secretary, and Janet Yellen, the Treasury secretary, following its addition to a list of companies with suspected ties to the Chinese military.
[co-authors: Nick Russell, and Alasdair Kan]
Key Points
The U.S. government has recently imposed controls pertaining to “Communist Chinese Military Companies” (CCMCs or “1237 entities”); Chinese “Military End Users” (MEUs); and Chinese “Military-Intelligence End Users” (MIEUs). The U.S. government has also been adding Chinese companies to the Entity List based on concerns regarding the companies’ relationships to the Chinese military industrial complex.
Although the names and underlying policy concerns are similar, the scope and source of the prohibitions regarding each set of Chinese entities are quite different. Companies on one of the lists are not automatically on others, but overlap is possible as the lists evolve. These lists are in addition to the Chinese entities that are on the Unverified List (UVLs), the Denied Persons List (DPLs), and the Specially Designated Nationals and Blocked Persons List (SDNs).
I. Overview
With just one week remaining in his term, President Trump amended Executive Order (“
EO”) 13959, which prohibits U.S. persons from investing in the securities of Chinese Military Companies (“
CMCs”), to continue his aggressive stance toward such CMCs. The amended EO now generally prohibits all transactions (rather than just investments) in CMC securities and requires U.S. persons to divest themselves of all such securities by November 11, 2021, and within 365 days for future listed CMCs. We discussed the earlier version of EO 13959 at length in a previous client alert, and OFAC’s interpretations of key terms (which generally remain valid) in another client alert.