Shares in Chinese smartphone giant Xiaomi surged nearly 7 percent in Hong Kong trading on Wednesday after the US government agreed to withdraw a Trump administration blacklisting of the company.
The US blacklisting came after the Trump administration Chinese designated the firm as a Communist Chinese Military Company. The blacklisting of Xiaomi, as well as other major Chinese companies, meant that American investment would be restricted in those Chinese corporations.
Xiaomi Had Challenged US Order
It has now been reported that the The US Defense Department has agreed that vacating the order blacklisting Xiaomi was appropriate. Xiaomi had earlier sued the government against the decision to blacklist it.
Both Xiaomi and Pentagon representatives weren't immediately available for comment, the Business times of Singapore said. "The Parties have agreed upon a path forward that would resolve this litigation without the need for contested briefing," a court filing said, according to the BT report. It also said the parties are discussing specific terms of the agreement and will file a joint proposal before May 20.
Trump's Plan to Take on Companies With China Military Link
The blacklisting of Xiaomi was in line with the Trump administration's stated objective of taking on large Chinese corporations in the tech sector that allegedly have connections with the Chinese military.
The blacklisting of Xiaomi came in early January this year. The Trump administration blacklisted it, along with nine other Chinese companies. Xiaomi, China's No. 2 smartphone maker, has huge markets across Europe and Asia as well.
Earlier in December, the US had blacklisted China's top chipmaker SMIC, raising the stakes in the ongoing trade spat between the two largest economies of the world. It was reported then that at least a dozen other companies will also be blacklisted along with SMIC.
The US move against Xiaomi had resulted in a huge erosion in the wealth of its top executives. The top two executives at the company together lost more than $4.5 billion on a single day in the massive selloff on the markets. Lei Jun, the chief executive officer, was estimated to have lost a whopping $3 million, while Lin Bin, the vice-chairman, lost around $1.5 billion. Besides the two, the wealth of at least five other billionaire shareholders in Xiaomi suffered large erosion.
Xiaomi was founded around ten years ago in Beijing. Xiaomi reiterated that it has no connection with the People's Liberation Army (PLA). It said it can confirm that it is "not owned, controlled or affiliated with the Chinese military, and is not a 'Communist Chinese Military Company' defined under the NDAA [National Defense Authorization Act]."