Xiaomi and the US government reached an agreement to remove the company from a Trump Administration block list that could have restricted US investment in the Chinese smartphone maker.
The Chinese smartphone giant had sued the government earlier this year, after the US Department of Defense, under former President Donald Trump, issued an order designating the company as a Chinese Communist Military Enterprise. , which would have forced it to suspend the listing of its shares on the US stock exchanges and its removal from the global benchmark indices. The US Department of Defense has now agreed that a final order nullifying the designation “would be appropriate,” according to documents filed Tuesday in US courts.
Pentagon representatives were not immediately available to comment after hours. Chinese Foreign Ministry spokeswoman Hua Chunying told a regular press conference in Beijing that she was not aware of any deal the company may have reached with the United States.
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For its part, Xiaomi mentioned that “by annulling the designation, the court formally lifted all restrictions on the ability of American people to buy or hold company securities.”
The company thanked “the trust and support of its users, partners, employees and global shareholders.” Xiaomi reiterated that it is an open, “transparent, publicly traded, independently operated and managed corporation that will continue to provide reliable consumer electronics products and services to users.”
“The parties have agreed on a way forward that would resolve this dispute without the need for a contested report,” according to the filing, which does not indicate whether the agreement includes any conditions for removal. The parties involved are negotiating the specific terms and will submit a separate joint proposal before May 20.
Xiaomi’s shares rallied as much as 6.7% this Wednesday in Hong Kong, while its 2030 dollar bond spread narrowed 10 basis points to 177, the lowest level since January.
What Bloomberg Intelligence says:
Market sentiment around Xiaomi could improve if an agreement is reached with the United States to remove it from a list of companies restricted to US investment. Its designation as a Chin Communist Military Enterprise earlier this year had nothing to do with fundamentals, but preceded a 15% drop in Xiaomi’s share price since it was announced, even as mainland investors increased ownership in 27%.
Follow the news of El Espectador on Google NewsMatthew Kanterman and Nathan Naidu, Analysts
Xiaomi, which makes robotic vacuums, electric bikes and wearable devices in addition to smartphones, had been an unexpected target for the Trump Administration. Co-founded by billionaire businessman Lei Jun more than 10 years ago, with US chipmaker Qualcomm as an early investor, the company has insisted that it is not owned or controlled by the Chinese military.
In March, a US court sided with Xiaomi in the lawsuit and temporarily suspended the ban. US District Judge Rudolph Contreras said Xiaomi was likely to get a full reversal of the ban as the litigation developed and issued an initial order to prevent the company from suffering “irreparable damage.”
The agreement marks a rare victory for Chinese tech giants caught in the crosshairs of the US government, as the two nations have clashed over issues ranging from trade to human rights to the Hong Kong government. Trump signed an order in November banning US investment in Chinese companies owned or controlled by the military, in an attempt to pressure Beijing for what the United States has called abusive business practices. The order against Xiaomi, along with a handful of other Chinese companies, was issued in the last days of his Administration.
