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Xiaomi, however, reported a positive year whereby its stock rallied over 120%.
The stock of Chinese multinational electronics company Xiaomi Corp. (HKG: 1810) closed the Hong Kong trading session at HK$ 29.40, 10% down. The drop is largely attributed to news that the company has been added to the American blacklist of alleged Chinese military associated companies.
“The Department is determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities,” the DOD said in a statement.
As a result, Xiaomi is now subjected to the executive order signed by outgoing United States President Donald Trump late last year. According to the executive order, American investors are barred from investing in the said Chinese companies. Among the listed companies include those involved in the construction industry, aerospace, technology, and communication industry.
Xiaomi, however, vehemently denied the accusations and indicated it provides services free from government intervention. “The Company reiterates that it provides products and services for civilian and commercial use. The Company confirms that it is not owned, controlled, or affiliated with the Chinese military, and is not a ‘Communist Chinese Military Company’ defined under the NDAA,” Xiaomi said.
With less than a week to President-elect Joe Biden’s inauguration, it is not yet clear what path the administration will take pertaining to the executive order. There has been no official communication from Biden’s team on the issue since the signing of the order.
The Trump administration has been very strict with Chinese technology companies, a move that has negatively affected their global development. Previously, Huawei was among the first companies to be blacklisted lost its Europe bid for rolling out the 5G network.
Xiaomi Stock Performance
Xiaomi was previously cited to be the world’s third-largest smartphone maker according to Counterpoint Research. The company is well known for producing affordable and up-to-date electronics including smartphones and laptops.
The move by the United States to blacklist Xiaomi can influence US allies to follow suit thus negatively affect its global shipments.
Notably, the global smartphone shipments declined last year in comparison to prior years due to the coronavirus pandemic.
Xiaomi, however, reported a positive year whereby its stock rallied over 120% according to metrics provided by MarketWatch. Meanwhile, Xiaomi shares are up approximately 26.57% in the past three months but down 8.29% in the past five days.
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