Alibaba, Baidu, and BYD on the Pentagon's Military List: Stop to US Defense Contracts Starting in June
The American Department of Defense has added Alibaba, Baidu, BYD, and Nio to the list 1260H of Chinese companies linked to the military apparatus. The list now also includes memory chip manufacturers CXMT and YMTC, the biotech WuXi AppTec, RoboSense Technology, and Unitree, which specializes in humanoid robots. This year, the list has reached 188 Chinese companies, compared to about 130 the previous year.
The designation does not impose formal sanctions but prohibits the Pentagon from entering into direct contracts with the listed companies starting in June 2026 and from purchasing their products or services through third parties starting in June 2027. The most impactful mechanism is indirect: American companies working with defense may exclude designated entities from their supply chain to avoid compromising contracts with the Pentagon.
The Pentagon had previously published an updated list in February, which was then withdrawn before Trump's trip to Beijing in May, close to the meeting with Xi Jinping. The current list is identical to the February one and re-includes CXMT and YMTC, which had been excluded from the withdrawn version.
The 1260H list, initially compiled in 2021, identifies Chinese companies with ties to the defense industrial base: not only those directly controlled by the armed forces but also those that contribute indirectly. The Pentagon has indicated that Alibaba, Baidu, and BYD are affiliated with the Chinese Ministry of Industry and Information Technology, which oversees the country’s technological and industrial policies. Unitree was designated based on the government support it received as a high-innovation small enterprise, relevant to the national supply chain.
The Companies Contest and Precedent in Their Favor
All three high-profile companies responded with formal statements of rejection. Alibaba stated that there is no basis for its inclusion: “Alibaba is not a Chinese military company and is not part of any civil-military fusion strategy. We will take all legal actions available to us against any attempt to misrepresent our company.” Baidu categorically rejected the designation: “The insinuation that Baidu is a military company is completely unfounded. We will not hesitate to use all available options to ensure that the company is removed from the list.” BYD called its inclusion a stark contradiction to the facts and announced the use of all possible legal means to protect its interests.
The designated companies have a favorable precedent to reference: in May 2021, Xiaomi won a legal challenge that led to its removal from the list.
China's Foreign Ministry Takes a Stronger Stance
The Chinese Foreign Ministry has adopted a harsher tone. Spokesperson Lin Jian urged the US to "correct its wrongs and cease the unfounded suppression of Chinese companies." In a formal statement, Beijing asserted that “China will take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies.”
Pressure Extends to Chips and Taiwan
In parallel to the list, Senators Jim Banks (Republican) and Andy Kim (Democrat) sent a letter to the Director of the Bureau of Industry and Security, Jeffrey Kessler, requesting stricter rules to prevent manufacturers like TSMC from supplying advanced AI chips to foreign subsidiaries of Chinese companies.
Taiwan is considering implementing regulations similar to those in the US, with potential restrictions on the export of AI chips to all Chinese customers, not just those already included on the Pentagon’s blacklist. The proposed framework would prohibit sales of higher processing capacity chips to Chinese customers.
The designated companies have until June 2027 before indirect purchasing bans take effect.