U.S. Blacklists Xiaomi, Oil Giant Cnooc in Late Anti-China Push

(Bloomberg) -- The Trump administration blacklisted Chinese smartphone manufacturer Xiaomi Corp. for its military links along with the country’s third-biggest oil company over its drilling in the South China Sea, part of a final push to ratchet up pressure on Beijing before President-elect Joe Biden takes office.

The Commerce Department’s move against China National Offshore Oil Corp., the nation’s main deepwater explorer, denies it access to U.S. technologies without specific permission. The announcement follows a December decision to blacklist more than 60 other Chinese companies.

And Xiaomi was one of nine firms added to the Defense Department’s list of Chinese military companies. Other firms include state-owned planemaker Commercial Aircraft Corp. of China Ltd., or Comac, which is central to China’s goal of creating a narrow-body plane that can compete with Boeing Co. and Airbus SE.

Under an executive order President Donald Trump signed in November, U.S. investors will have to unwind stakes in any company on the Defense Department list by next November. Keith Krach, the State Department’s undersecretary for economic growth, energy and the environment, told reporters Thursday that “ample warning has been given to the public about the material risks associated with investments” identified in Trump’s executive order.

Xiaomi surpassed Apple Inc. in smartphone sales in the third quarter, according to the International Data Corporation. It joined Hong Kong’s Hang Seng Index in September after grabbing market share from Huawei Technologies Co. as U.S. sanctions on Huawei deepened.

Cnooc is the smallest of China’s so-called big three state-owned oil majors after China National Petroleum Corp. and China Petrochemical Corp., also known as Sinopec. The company’s operations in the South China Sea have proved controversial with neighbors because China claims drilling rights in waters far from its borders, and within 200 miles of countries like Vietnam and the Philippines.

“China’s reckless and belligerent actions in the South China Sea and its aggressive push to acquire sensitive intellectual property and technology for its militarization efforts are a threat to U.S. national security,” Commerce Secretary Wilbur Ross said in a statement. “CNOOC acts as a bully for the People’s Liberation Army to intimidate China’s neighbors, and the Chinese military continues to benefit from government civil-military fusion policies for malign purposes.”

It was not immediately clear why Cnooc had been added now after it was not included in earlier listings.

But the ban doesn’t apply to sales of hydrocarbons such as crude oil and also wouldn’t affect joint ventures between Cnooc and Western companies, a senior administration official, speaking on customary condition of anonymity, told reporters in a briefing Thursday.

Cnooc has been at the center of territorial disputes in the region since 2012, when it invited foreign drillers to explore blocks off Vietnam that Hanoi’s leaders had already awarded to companies including Exxon Mobil Corp. and OAO Gazprom.

The Commerce Department also added Skyrizon to the military end-user list, saying it poses a threat to national security. Ross said the company’s push to acquire and “indigenize” foreign military technologies posed a significant threat to U.S. national security and foreign policy interests.

“This action serves to warn the export community of Skyrizon’s significant ties to the People’s Liberation Army,” Ross said.

(Uodates with senior official quote, in fourth paragraph.)