Chinese smartphone vendor Xiaomi (HKSE: 1810) has sued the US Department of Defense and Department of the Treasury, following their recent decision to include it as a “Communist Chinese Military Company,” according to a filing from Sunday.
The tech giant said it believes that the decision, which makes it impossible for US investors to buy into Xiaomi, was “factually incorrect and has deprived the company of legal due process.” Xiaomi hopes that the US District Court for the District of Columbia would declare the decision illegal and reverse it.
“Xiaomi knows well that US judicial institutions are in place to check and balance the administrative power,” Zhao Baodong, a Shenzhen-based lawyer with Beijing DHH Law Firm, told KrASIA on Monday. “As a company, Xiaomi has no other better option to protect its own rights beyond legal measures currently,” he said. “It cannot wait for the Chinese government to come to its rescue.”
The Biden administration postponed the date for the investment ban from January 28 to May 27 to buy some time to review the policy, according to Business Insider. For Zhao, Xiaomi’s legal action may have little effect on the new administration as the government has taken all factors, including possible lawsuits, into consideration. What matters for him, is the new government’s stance and policy towards China.
“Xiaomi’s lawsuit might not have much chance of success under normal circumstances,” said Brock Silvers, CIO of Kaiyuan Capital. “Should it be politicized, however, it could be reversed.”
“Given that China policy is perhaps the one area of agreement between Republicans and Democrats, however, a reversal remains unlikely,” Silvers predicted, adding that he believes that Xiaomi has little to lose with a legal challenge.
China tech vs US
It’s not the first time that a Chinese tech company is taking legal action against the US government. Huawei, which has been added to the Entity List by the US Department of Commerce and thus has no access to American tech and services, has filed several lawsuits during President Trump’s tenure in office. It sued to block a FCC decision in 2019 that further restricted its ability to operate in the country. TikTok, the video-sharing app owned by Beijing-based ByteDance, filed a lawsuit in August against a ban that affected the company’s US operations.
Xiaomi has shipped 43.3 million smartphones in the fourth quarter of 2020, ranking third following Apple’s 81.8 million units and Samsung’s 62 million, still ahead of Huawei with 32 million units, that include the Honor brand, according to market research firm Canalys. Huawei sold Honor in November in a rescue move due to the US ban.
