U.S. Bans Americans From Investing in Xiaomi but Spares Alibaba, Tencent and Baidu
January 15 2021 - 4:17AM
Dow Jones News
By Chong Koh Ping
Smartphone giant Xiaomi Corp. became the latest Chinese
technology group to be targeted by the Trump administration, with
its surprise addition to a U.S. investment blacklist sending its
shares sharply lower.
The addition of Xiaomi wrong-footed analysts and investors.
Xiaomi, a consumer electronics company that focuses on mobile
phones and household appliances, had managed to avoid U.S. pressure
even as Washington tightened the screws on Chinese tech groups
including Huawei Technologies Co., seeking to curb their access to
American technology and funding.
Xiaomi's stock has more than doubled in the past 12 months and
the company has been rapidly gaining market share. In the third
quarter of 2020, it overtook Apple Inc. to become the world's
third-largest smartphone maker, according to Gartner.
On Thursday, the U.S. Department of Defense added Xiaomi to a
list of companies it says support China's military. Under the terms
of an executive order issued by President Trump, the designation
means that after 60 days, U.S. investors won't be able to buy
Xiaomi stock, and they have a year to sell existing holdings.
Xiaomi's Hong Kong-listed shares fell almost 14% Friday before
closing 10% lower.
The company said Friday it provides products and services for
civilian and commercial use, and wasn't owned, controlled or
affiliated with the Chinese military. In a filing to the stock
exchange, it also said it wasn't a "Communist Chinese military
company" under the U.S. definition.
Xiaomi said it would take appropriate action to protect itself
and its shareholders.
"It hadn't crossed my mind that it'd be classified as a Chinese
military company," said Kevin Chen, a tech hardware and
telecommunications analyst at China Merchant Securities. "But at
least it isn't on the entity list," he said.
Because Xiaomi isn't on the Commerce Department's so-called
entity list, which restricts companies from exporting U.S.-origin
technology to firms without a license, Mr. Chen said the company
would be able to continue using chips from Qualcomm and the Android
operating system from Alphabet Inc.
That is in contrast to Huawei, whose overseas sales have fallen
because of U.S. supply restrictions. Mr. Chen said Xiaomi has a
good chance of picking up Huawei's smartphone market share in
Europe.
Paul Triolo, an analyst at political-risk consulting firm
Eurasia Group, said Xiaomi's blacklisting was a mystery, and it
didn't have known major links to China's People's Liberation Army.
"The criteria for inclusion remains opaque," he said.
In addition to Xiaomi, Shanghai-listed Advanced
Micro-Fabrication Equipment Inc., state-owned passenger-jet maker
Commercial Aircraft Corp. of China, or Comac, and six other
companies were added to the list Thursday.
Before the addition of the nine companies Thursday, the
investment ban already covered 35 companies, many of them large
conglomerates with numerous publicly traded units. The Treasury
Department has said it would add company subsidiaries to the list,
and has also said the ban extends to some units whose names closely
match those of banned entities.
This week, The Wall Street Journal reported that the U.S.
government was expected to let Americans continue to invest in
Chinese technology giants Alibaba Group Holding Ltd., Tencent
Holdings Ltd. and Baidu Inc., after weighing their potential
addition to the blacklist, but was set to add nine other
companies.
Mr. Triolo said the latest list was "almost certainly the last
salvo" in the Trump administration's last days. He said the
incoming Biden administration was likely to review the most recent
additions in the 60 days before curbs take effect, and could
subsequently roll back or modify the actions.
Write to Chong Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
January 15, 2021 04:02 ET (09:02 GMT)
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