Xiaomi, the Chinese smartphone maker, has sued the US government over a move by Donald Trump in his last week as president to place the company on a Pentagon blacklist that bars Americans from investing in it.

The group, which has overtaken Apple to become the third-biggest smartphone maker, filed a lawsuit against Lloyd Austin, the US defence secretary, and Janet Yellen, the Treasury secretary, following its addition to a list of companies with suspected ties to the Chinese military.

The Pentagon last year started compiling a list of Chinese companies with alleged ties to the People’s Liberation Army after the White House put pressure on the defence department to comply with a 1999 law that had included the requirement. The Pentagon added Xiaomi to the blacklist on January 14.

The Trump administration then used the list as the basis for implementing an executive order that bars Americans from investing in such companies.

The Treasury earlier this week extended the deadline for the ban to take effect to May 27. The extension was designed to give the new US administration time to evaluate the order as part of a broad review of China policies that Mr Trump implemented in his final months in office.

The administration of Joe Biden has not signalled whether it will keep the ban. But the new president would likely face political repercussions if he reversed the prohibition because of bipartisan pressure from lawmakers on Capitol Hill to maintain a tough stance towards the Chinese Communist party.

Mr Biden has shown early signs that he intends to adopt a tough approach. Antony Blinken, secretary of state, this week said he agreed with the Trump administration that China was committing “genocide” in Xinjiang province with the detention and repression of over 1m Uighur Muslims.

Separately, the Pentagon on Friday accused the Chinese military of continuing a “string of aggressive and destabilising actions” after the Financial Times reported that Chinese warplanes simulated an attack on a US aircraft carrier during a recent incursion into Taiwan’s air defence zone.

Xiaomi said in its lawsuit that banning US investors from being able to take stakes in it would “cause immediate and irreparable harm” and would hurt its global reputation.

The Beijing-based company said the US government had not provided any evidence to back up the claim that it was what the Pentagon refers to as “Communist Chinese Military Companies”. The designation of Chinese companies as CCMCs was part of a much broader and aggressive effort against Chinese entities that the US believes could hurt its own security.

The Trump administration placed several dozen groups on the Pentagon list, and dozens more on the commerce department’s “entity list” which makes it very hard for US companies to export technology to those companies.

Earlier on Friday, Senator Marco Rubio and two other Senate Republican hawks, Tom Cotton and Ben Sasse, asked Gina Raimondo, the commerce secretary nominee, to clarify remarks from her confirmation hearing in which she refused to commit to keeping Huawei on the “entity list”.

“Huawei has a long track record of economic espionage, supporting human rights abuses in the PRC [People’s Republic of China] and elsewhere,” they wrote in a letter. “We ask that you respond in writing with your view of whether you foresee any scenario in which you would . . . either remove Huawei, or its subsidiaries, or spin-off companies from the entity list.”

The Pentagon and Treasury did not respond to a request for comment about the Xiaomi lawsuit.

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