June 23, 2021

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Pentagon to Take away China’s Xiaomi From Blacklist After Lawsuit

HONG KONG—The Protection Division has agreed to take away Xiaomi Corp. from a blacklist that prohibits U.S. funding within the Chinese language tech big, reversing course after a federal court docket had granted a short lived halt to the ban following a lawsuit by the corporate.

In a one-page submitting in Washington, D.C., federal court docket Tuesday, legal professionals for each side mentioned eradicating Xiaomi from the U.S. blacklist was acceptable following the corporate’s court docket victory in March, thereby avoiding further litigation over the matter.

Xiaomi filed a lawsuit in January difficult the Pentagon’s determination to position it on its blacklist of corporations with alleged hyperlinks to China’s navy. Xiaomi denied any such ties.

Shares of Xiaomi rose nearly 6% in afternoon buying and selling in Hong Kong following the disclosure.

The tech battle between the U.S. and China has battered TikTok and Huawei and startled American corporations that produce and promote in China. WSJ explains how Beijing is pouring cash into high-tech chips because it needs to develop into self-sufficient. Video/Illustration: George Downs/The Wall Road Journal

The Pentagon’s transfer marks a retreat in its efforts to implement a Trump administration-era software geared toward punishing collaboration between main Chinese language corporations and the nation’s navy, an initiative referred to as military-civil fusion. The division since final yr has added dozens of corporations in sectors together with telecommunications, semiconductors and aviation to its blacklist of companies deemed to help China’s navy.

Representatives for the Protection Division didn’t instantly reply to requests for remark.

A Xiaomi spokeswoman mentioned the corporate is “paying shut consideration to the event of this challenge.” The corporate has beforehand denied any affiliations with the Chinese language navy and says it sells services solely for civilian and industrial use.

Below an government order signed by former President

Donald Trump

in November, addition to the listing blocks any American firm or agency from investing in securities issued by the listed firm. The Pentagon added Xiaomi, China’s top-selling telephone maker, on Jan. 14.

It wasn’t till after Xiaomi challenged its itemizing in federal court docket later that month that the Protection Division revealed its reasoning behind the itemizing. Officers cited an award given to firm founder and Chief Government

Lei Jun

for his service to the Chinese language state in 2019, in addition to its formidable funding plans to develop superior applied sciences similar to 5G and synthetic intelligence.

In authorized filings, Xiaomi mentioned the proof provided by the U.S. didn’t show possession by or affiliation with the Chinese language navy.

Decide

Rudolph Contreras

in March ordered a short lived halt to the enforcement of the funding ban, saying that the Pentagon had supplied inadequate proof to deem Xiaomi a navy firm. The choose known as the agency “a publicly traded firm that produces industrial merchandise for civilian use, [which] is managed by its impartial board and controlling shareholders.”

Within the settlement introduced by Xiaomi and the Pentagon on Tuesday, the 2 sides mentioned they’d negotiate the phrases of a remaining order vacating Xiaomi’s blacklisting in gentle of Decide Contreras’s determination. They mentioned they’d suggest a remaining order to the court docket no later than Might 20.

The Pentagon was dealt one other setback final week, after Decide Contreras ordered a short lived halt to the enforcement of its blacklisting of

Luokung Expertise Corp.

, a Chinese language mapping and big-data firm.

Nonetheless, the U.S. is transferring to implement funding bans on different corporations on the Protection Division listing. Final week, the New York Inventory Trade utilized to the Securities and Trade Fee for permission to delist the American-listed shares of China’s huge three telecom carriers,

China Cell Ltd.

,

China Unicom (Hong Kong) Ltd.

and

China Telecom Corp.

The transfer, which got here after unsuccessful appeals by the carriers, put the businesses on monitor to be delisted by subsequent week.

Write to Dan Strumpf at [email protected]

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