Blacklisted Chinese firms eye lawsuits after Xiaomi win against Trump ban

Chinese companies targeted by a sweeping investment ban imposed by former US President Donald Trump are considering suing the US government after a federal judge last Friday suspended a similar blacklisting for smartphone maker Xiaomi.

Lawyers familiar with the matter said some of the banned Chinese companies are in talks with law firms including Steptoe & Johnson and Hogan Lovells, emboldened by US District Judge Rudolph Contreras’ preliminary order halting Xiaomi’s inclusion on a US list of alleged Chinese military companies.

The Trump administration’s move to blacklist Xiaomi Corp, which knocked US$10 billion off its market share and sent its shares down 9.5 percent in January, would have forced investors to completely divest their stakes in the company.

“Companies are reaching out to lawyers to challenge the listings and the grounds for the listings,” said Wendy Wysong, managing partner of the Hong Kong office of Steptoe & Johnson, a worldwide law firm headquartered in Washington. Wysong and a person familiar with Hogan Lovells, another global law firm, declined to name the companies involved in discussions.

Contreras flagged the US government’s “deeply flawed” process for including the company in the ban, based on just two key criteria: its development of 5G technology and artificial intelligence, which the Defense Department alleges are “essential to modern military operations,” and an award given to Xiaomi founder and Chief Executive Lei Jun from an organization said to help the Chinese government eliminate barriers between commercial and military sectors.

The judge noted that 5G and AI technologies were fast becoming standard in consumer electronics, and that over 500 entrepreneurs had received the same award as Lei since 2004.