Pentagon Considers Adding Alibaba, Baidu, and BYD to Military-Linked Companies List

TLDR

• The Pentagon concluded in October that Alibaba, Baidu, and BYD should be added to its 1260H list of Chinese companies linked to the military
• Deputy Defense Secretary Stephen Feinberg informed lawmakers about this decision on October 7, three weeks before a trade truce between the US and China
• Shares of all three companies fell in Hong Kong trading after Bloomberg reported the news, with Alibaba down 2.2% and Baidu and BYD each losing about 1%
• Alibaba denied any military connections and stated the designation would not affect its business operations in the US or globally
• Five other Chinese companies were also considered for addition to the Pentagon’s list, which currently includes 134 companies

The Pentagon has determined that three major Chinese companies should be placed on a government list identifying firms that support the Chinese military. Alibaba, Baidu, and BYD received this designation in October according to a Bloomberg News report.

Deputy Defense Secretary Stephen Feinberg sent a letter to lawmakers on October 7 outlining the conclusion. This notification came three weeks before Presidents Donald Trump and Xi Jinping reached a broad trade agreement between the United States and China.

The companies may be added to the Pentagon’s 1260H list. This list identifies Chinese companies considered to have military ties but that operate within the United States.

It remains unclear whether the three companies have officially been added to the list. The Pentagon has not confirmed their placement on the roster.

Market Reaction to Military Designation News

Stock prices for all three companies dropped in Hong Kong trading following the report. Alibaba shares fell 2.2% while Baidu and BYD each declined about 1%.

Alibaba Group Holding Limited, BABA

The declining stocks put pressure on the broader Hang Seng index. The index managed to rise 0.3% despite the weight from these three companies.

Being placed on the 1260H list does not trigger immediate business restrictions. However, the designation can damage company reputations and discourage US firms from doing business with listed companies.

Five additional Chinese companies face potential inclusion on the Pentagon’s list. These companies are Eoptolink Technology, Hua Hong Semiconductor, RoboSense Technology, WuXi AppTec, and Zhongji Innolight.

Company Response to Pentagon Decision

Alibaba issued a statement denying any military connections. The company said there is no basis for placing it on the Section 1260H list.

The tech giant clarified it is not a Chinese military company. Alibaba also stated it is not part of any military-civil fusion strategy.

The company maintains the designation would not impact its operations. Alibaba emphasized it does not conduct any business related to US military procurement.

Alibaba can continue normal business activities in the United States and worldwide. The company said this would remain true even if officially placed on the list.

Baidu and BYD have not responded to requests for comment. The Pentagon also has not provided additional statements about the potential additions.

Pentagon’s 1260H List Details

The Section 1260H list is updated annually under US law. The most recent update in January designated 134 companies.

Major Chinese companies already appear on the current list. Tech giant Tencent Holdings and battery maker CATL are among the designated firms.

The list serves as a warning to US entities about business risks. Companies and government agencies receive guidance about potential military connections when dealing with listed firms.

The Pentagon concluded eight companies merit inclusion in the next update. The three major tech and automotive firms lead the potential additions along with five other Chinese companies.

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