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Xiaomi shares climbed more than a tenth after a U.S. court granted the Chinese smartphone maker a reprieve from Trump’s restrictions on U.S. investment.
Shares of the company, which overtook Apple as the world’s third-largest smartphone maker, rose 12% in Hong Kong on Monday.
U.S. District Judge Rudolph Contreras granted a temporary halt to the trade ban on Friday. He said the US case against Xiaomi was “deeply flawed” and that the smartphone maker would likely succeed in its legal action to withdraw its designation as a Chinese military-linked company.
The decision marked the last instance of a US court blocking sanctions imposed by former President Donald Trump on Chinese companies.
A coalition of users of Tencent’s WeChat app successfully overturned the ban on the popular messaging app, while short video company ByteDance also pushed back on government action.
The Trump administration has used a collection of executive orders and at least two separate blacklists maintained by the Pentagon and the Commerce Department to target Chinese companies.
He placed several dozen Chinese groups on the Pentagon’s list because of alleged ties to the People’s Liberation Army, and dozens more on the Commerce Department’s “entity list”. The restrictions that make it very difficult for US companies to export technology to them without special permission.
Xiaomi sued the U.S. government in January for its inclusion, which, along with a separate executive order from Trump, would have prevented U.S. investors from owning its shares, potentially triggering its delisting from U.S. stock exchanges and its removal from the indexes of global benchmarks.
“There were so many Chinese companies on all of these lists so quickly that the US agencies might not have fully developed the evidence against them,” said Wendy Wysong of the law firm Steptoe & Johnson.
“Now we are asking the government to show the evidence. The ruling in Xiaomi’s case will prompt other listed companies to ask the courts to review the reasons for which they were put on these lists, ”she said.
Washington cited the recognition of Xiaomi founder Lei Jun as an “outstanding builder of socialism with Chinese characteristics” by a Chinese ministry and the company’s investment in 5G and artificial intelligence as the main motives for allegation that the group had ties to the PLA.
In his decision, Contreras noted that more than 500 entrepreneurs received the same award, including “executives of a Chinese powdered milk and infant formula company, the maker of a well-known brand of chili sauce and a barley wine producer ”.
“There is clearly a lack of substantial evidence to adequately support a conclusion that Xiaomi is a [Communist Chinese military company],” he said.
Xiaomi has said it will continue to pursue its case with the aim of having its Chinese military-related company label permanently removed.
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