Xiaomi photo:VCG

Chinese smartphone maker Xiaomi on Wednesday reached an agreement with the US Department of Defense, under which the Pentagon will remove Xiaomi from its blacklist, according to a joint statement obtained by the Global Times, marking a significant win for the Chinese firm in its legal challenge against the US' crackdown.

"Defendants [the US Defense Department] have agreed that a final order vacating the January 14, 2021 designation of Xiaomi Corporation as a CCMC pursuant to section 1237 of the FY 1999 NDAA, as amended, would be appropriate," read the statement.

The agreement came after a US federal judge in March temporarily halted enforcement of the blacklisting imposed under the Trump administration, after Xiaomi filed a lawsuit against the US government, calling the blacklisting "unconstitutional."

Following the announcement, Xiaomi's shares in Hong Kong rose as much as 6.6 percent on Wednesday.

However, despite the hard-fought win for Xiaomi, some in China cautioned that the US' crackdown campaign against Chinese firms will likely continue, as a rivalry between the world's two biggest economies continues to intensify under US President Joe Biden.

Commenting on the agreement between Xiaomi and the Pentagon, a spokesperson for the Chinese Foreign Ministry called on the US to rectify "mistake" made by the previous administration regarding Chinese businesses.

"China supports Chinese enterprises in safeguarding their legitimate rights and interests through legal channels. We hope the US will correct the last administration's mistake to provide a just, fair and non-discriminatory business environment for Chinese companies," Hua Chunying, the spokesperson, said at a routine press briefing on Wednesday.

Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations, told the Global Times on Wednesday that the agreement doesn't mean that the US is loosening its restrictions against Chinese companies. 

"Instead, it is likely to be the Biden administration's move to selectively let US-listed Chinese companies go to protect the interests of the US capital market.

"Biden's style, which is more pragmatic and realistic, is different from Trump's, and the move shows that Biden is reviewing the extreme measures taken by Trump to better protect the interests of the US stock market, as Chinese companies account for a large share in the US market," Chen added.

On January 14, just days before former US president Donald Trump left office, the US Defense Department put Xiaomi on its blacklist, citing unsubstantiated claims that the company has ties with the Chinese military.

Xiaomi sued the US government on January 29 over the blacklisting, saying that the Pentagon's move is "unconstitutional because it deprives Xiaomi of its liberty and property rights without due process of law." 

On March12, after a US court blocked the Pentagon's move; Xiaomi welcomed the ruling, saying it would continue asking the court to permanently remove the designation, and adding that it is a "widely held, publicly traded, independently managed" company that offers products only for civilian and commercial use.

Under the agreement announced on Wednesday, Xiaomi and the Pentagon will negotiate over the specific terms of the order and provide a joint proposed order on or before May 20, 2021, according to the statement.