U.S. agrees to lift Trump-era ban on China's Xiaomi

In this July 9, 2018, file photo, an advertisement for Xiaomi is displayed at a subway station in Hong Kong. (AP Photo/Vincent Yu, File)

The U.S. government will no longer blacklist Chinese smartphone maker Xiaomi, lifting a short and contentious ban on Americans investing in the company that was introduced by the Trump administration.

The U.S. Department of Defense and Xiaomi reached an agreement to set aside the ban on Tuesday, according to a US court filing. The "parties have agreed upon a path forward that would resolve this litigation without the need for contested briefing," the filing said.

Xiaomi, the world's third largest smartphone maker, did not comment on the development, but sent CNN Business a copy of the court document.

Days before President Joe Biden took office in January, the Department of Defense added Xiaomi to a list of companies it claimed were linked to the Chinese military. Businesses on the list are subject to harsh restrictions, including the American investment ban.

Before the ban could take effect, a federal judge granted a temporary reprieve to the Chinese company by ruling that Washington lacked "substantial evidence" to support its claim that Xiaomi is owned or controlled by China's military.

Tuesday's agreement marks a rare deescalation in increasingly tense US-China relations.

China's Ministry of Foreign Affairs spokesperson Hua Chunying said she wasn't aware of the agreement, but added that she hoped "the United States will correct the mistakes of the previous administration and provide a fair, just and non-discriminatory business environment for the normal operation of Chinese companies."

Shares of Xiaomi jumped more than 6 per cent in Hong Kong on Wednesday.

According to the court filing, the parties are still negotiating the details of the settlement and expect to finalize a joint proposal by May 20.

— Michelle Toh and CNN's Beijing bureau contributed reporting.