China's smartphone maker Xiaomi files complaint against U.S. Defense, Treasury ban

China's smartphone maker, Xiaomi Corp, issued a legal complaint in a Washington court on Friday against the move by the former administration to blacklist the company. 

The Defense Department, under the Trump administration in mid-January, added Xiaomi and eight other companies to a blacklist, claiming they had ties with the Chinese military, which requires American investors to divest their holdings in the firms by a set deadline.

In the complaint, addressed to Biden-appointed Defense Secretary Lloyd Austin and Treasury Secretary Janet Yellen, Xiaomi called the decision "unlawful and unconstitutional" and rejected the claims that it is controlled by the Chinese military.

It added that the investment restrictions would cause "immediate and irreparable harm to Xiaomi."

Xiaomi said 75 percent of the company's voting rights, under a weighted structure, were held by co-founders Lin Bin and Lei Jun, with no ownership or control from an individual or entity affiliated with the military.

It added that a "substantial number" of its shareholders were U.S. persons and noted three of its top-ten holders of ordinary shares were U.S. institutional investment groups.

"The company's strategic relationships with U.S. financial institutions – critical for Xiaomi to continue to access the capital it needs to continue to grow in a highly competitive market – will be significantly damaged," the complaint stated.

"Moreover, the public association of Xiaomi with the Chinese military will significantly impair the company's standing with business partners and consumers, causing reputational harms that cannot be readily quantified or easily repaired."

Xiaomi surpassed Apple taking the third spot on the global leaderboard since the third quarter of 2020, according to research firms Canalys and IDC. It sold 43.4 million handsets in the fourth quarter, a 31-percent surge from a year earlier, said Canalys.

(With input from Reuters)

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