Earlier this year in January, the US government put Xiaomi on a military blacklist that prohibited American entities from investing in the company. Xiaomi later went to court seeking to overturn the designation that could severely hamper its business prospects, citing severe and irreparable damage. Now, legal filings of the US Department have revealed that an award conferred upon Xiaomi co-founder and CEO Lei Jun was partly responsible for the company getting blacklisted.
The state agency that gave the award is perceived as a threat by US Defense Department
Jun received the Outstanding Builder of Socialism with Chinese Characteristics award in 2019 from China’s Ministry of Industry and Information Technology (MIIT). Now, MIIT is the state agency that regulates everything from telecom and internet to electronics production and industrial policy in China. However, the US Defense Department believes that MIIT oversees the Military-Civil Fusion development strategy of China which supports the modernization goals of the People’s Liberation Army (PLA) by helping it with advanced technology.
“The award is given once every five years to top private-sector entrepreneurs. The last award, in 2019, was given to 100 people. Other notable CEOs who also made the cut include Ding Lei of internet and videogame company NetEase Inc., Wang Gaofei of social media firm Weibo Corp., Wang Chuanfu of auto maker BYD Co.,” says a report by The Wall Street Journal.
Xiaomi, on the other hand, has argued that the US Department of Defense did not give it a chance to respond before blacklisting the company, and has also stressed that it is not controlled by – or affiliated with – the Chinese government or military
Another reason that landed Xiaomi in hot waters was the company’s plan to invest around $7.7 billion for the development of 5G and AI over the course of the next five years. Xiaomi’s ambition of ‘absolute dominance’ in the smart living segment by leveraging a combination of AI, 5G, and IoT also reportedly raised alarms. In the eyes of the US Defense Department, 5G and AI are the core components of the Chinese state’s Military-Civil Fusion strategy that poses a threat to the United States.