Escalating Scrutiny: Pentagon Moves to Classify Alibaba, Baidu, and BYD as Chinese Military-Linked Firms

U.S. defense officials have determined that several large Chinese companies—including Alibaba Group, Baidu, and BYD—should be added to the government’s roster of entities believed to support China’s military. This assessment was shared with Congress on October 7, roughly three weeks before Presidents Donald Trump and Xi Jinping reached a broad trade understanding.

In the notice, Deputy Defense Secretary Stephen Feinberg informed the chairs of the House and Senate Armed Services Committees that the Defense Department, after reviewing updated intelligence, had identified eight firms it believes qualify as “Chinese military companies” under Section 1260H. The three well-known corporations were listed together with five additional technology-oriented enterprises: Eoptolink Technology, Hua Hong Semiconductor, RoboSense, WuXi AppTec, and Zhongji Innolight.

The 1260H list, created in 2021 and now exceeding 130 entries, flags Chinese businesses operating in the United States that are thought to have ties to the People’s Liberation Army. While being added to the list does not automatically trigger legal penalties, it acts as a serious warning to U.S. investors. Law firms analyzing past cases, including Hogan Lovells, have noted that inclusion can lead to contract limitations involving defense agencies, increased compliance burdens, reputational challenges, and the possibility of additional sanctions. The January version of the list, released shortly before President Trump took office, does not yet include the eight newly identified companies.

Alibaba publicly rejected the Defense Department’s conclusion, arguing that there is “no basis” for being labeled as connected to the Chinese military. The company insisted it plays no role in military-civil fusion initiatives and that its business does not involve supplying the U.S. defense sector. Therefore, it said, being placed on the 1260H list would not hinder its ability to operate internationally. Alibaba has also disputed earlier allegations from the White House, describing them as unfounded and intended to undermine the recent trade accord.

China’s Ministry of Foreign Affairs strongly criticized the move, saying the United States continues to stretch the concept of national security and use it as a rationale for imposing unjustified restraints on Chinese enterprises. It urged Washington to reverse the decision and vowed to take steps to protect the rights and interests of the affected companies.

Representatives for the other five targeted firms did not immediately respond to requests for comment. Many of these companies play important roles in the global artificial-intelligence and robotics supply chain. For instance, Innolight and Eoptolink produce optical transceivers used in large-scale AI computing systems and are known collaborators of Nvidia. RoboSense is likewise listed by Nvidia as a partner in its autonomous-vehicle platform. Previous updates to the 1260H list have caused stock prices of listed firms—such as Tencent and CATL—to drop, suggesting the new designations could pose challenges for Alibaba’s ambitions in the global AI market.