(Reuters) – A US federal judge temporarily blocked the Defense Department on Friday from forcing US investors to divest from Chinese smartphone maker Xiaomi Corp because the company has ties to the Chinese military.
The Department of Defense, under the Trump administration in mid-January, added Xiaomi and eight other companies to a list that requires Americans to sell their stakes in the companies within a specified timeframe. The restrictions would take effect next week.
Xiaomi filed a complaint with a Washington court in late January requesting it be removed from the list, calling its inclusion “illegal and unconstitutional” and arguing that it was not controlled by the People’s Liberation Army.
US District Judge Rudolph Contreras in Washington, DC, said Friday that the court “concludes that defendants have not argued that the national security interests at stake here are compelling.”
Defense did not immediately respond to a request for comment.
In a statement, a Xiaomi spokesperson welcomed the statement, calling Xiaomi’s designation as a Chinese military company “arbitrary and erratic.”
Xiaomi intends to continue to ask the court to declare the designation illegal and to remove the designation permanently, the spokesman said.
Reporting by Praveen Paramasivam in Bengaluru; Edited by Cynthia Osterman, Sonya Hepinstall and Gerry Doyle