Shares in Xiaomi collapsed on Friday after the United States blacklisted the smartphone giant and a host of other Chinese firms as the Trump administration aims to cement its trade war legacy against Beijing. Beijing hit back at the latest sanctions, accusing the US of "abusing state power" to crack down on Chinese companies "for no reason".
The flurry of last-minute blacklistings is the coda to four years of aggressive diplomatic and trade policies towards rival China under Donald Trump. With just six days to go before the president leaves office, US officials made a series of announcements targeting Chinese firms including state oil giant CNOOC, Xiaomi and embattled social media favourite TikTok.
Xiaomi is one of the biggest companies to be blacklisted so far and its shares plunged more than 10 per cent in Hong Kong by the close of trading Friday after the announcement. US chip giant Qualcomm is a major investor. Xiaomi -- which overtook Apple last year to become the world's third-largest smartphone manufacturer -- was one of nine firms classified by the Pentagon as "Communist Chinese military companies".The Pentagon's move means US investors will be unable to purchase Xiaomi securities and will ultimately have to divest down the line unless the order is overturned by the incoming administration of Joe Biden.
Responding to the move, a Xiaomi spokesperson said, "The Company has been in compliance with the law and operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses. The Company reiterates that it provides products and services for civilian and commercial use."
"The Company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a "Communist Chinese Military Company" defined under the NDAA. 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," the spokesperson added further.
But the US Department of Defense said it was "determined to highlight and counter the People's Republic of China's military-civil fusion development strategy" that allowed it to access key technology and security data.
Similar actions have been made by the US against other tech firms including Huawei and chip giant SMIC, hobbling their ability to import key technology and compete internationally. "The Trump administration has broadened the concept of national security, abused state power and repeatedly cracked down on Chinese companies for no reason," said Chinese foreign ministry spokesman Zhao Lijian on Friday.