The Pentagon concluded in early October that Alibaba Group Holding Ltd., Baidu Inc. and BYD Co. should be designated as companies supporting China's military, according to a letter sent to congressional leaders weeks before Donald Trump and Xi Jinping struck a trade détente.
Deputy Defense Secretary Stephen Feinberg detailed the findings in an Oct. 7 letter to the chairs of the House and Senate Armed Services Committees, a copy of which was reviewed by Bloomberg News. The letter said the three major Chinese firms, along with five additional companies — merited inclusion on the Defense Department's Section 1260H list, which identifies Chinese military–linked entities operating in the United States.
The list carries no immediate legal penalties but acts as a stark warning to U.S. investors and can trigger downstream compliance and reputational risks. It was unclear whether the companies have yet been formally added. The most recent published version, updated in January before Trump took office, did not include the eight firms.
"In our review of the latest information available, the Department has identified eight entities that it has determined are 'Chinese military companies' in accordance with the statute that should be added to the 1260H list," Feinberg wrote. The eight companies identified were Alibaba, Baidu, BYD, Eoptolink Technology Inc., Hua Hong Semiconductor Ltd., RoboSense Technology Co., WuXi AppTec Co. and Zhongji Innolight Co.
The letter predates the Oct. 30 summit between Trump and Xi in South Korea, where the leaders agreed to a package of steps — including tariff reductions and commitments to pause certain export controls — aimed at stabilizing bilateral ties. The Pentagon declined to comment.
Alibaba rejected the Pentagon's assessment, saying there was "no basis" for including the company on the list.
"Alibaba is not a Chinese military company nor part of any military-civil fusion strategy," the firm said in a statement. It added that because it does not do business tied to U.S. military procurement, placement on the list would not affect its ability to operate in the U.S. or globally.
Baidu, BYD and the other firms named in the letter did not immediately respond to requests for comment.
China's Foreign Ministry condemned Washington's practice of "overbroadly defining national security" and creating "discriminatory lists under various pretexts." It urged the U.S. to "immediately correct its erroneous actions" and said Beijing would take necessary steps to protect Chinese companies' rights and interests.
Heightened Scrutiny on AI and Robotics
Chinese firms added to the list earlier this year triggered a market selloff that hit companies including Tencent Holdings Ltd. and battery giant Contemporary Amperex Technology Co. Ltd., underscoring the financial risks of the designation. Inclusion could pose challenges for Alibaba and the other companies as they seek to expand internationally, particularly in artificial intelligence, robotics and electric vehicles — sectors facing intensifying geopolitical scrutiny.
A White House memo leaked this month, first reported by the Financial Times, alleged that Alibaba had provided the Chinese military with technological support targeting U.S. assets. Alibaba dismissed the claims as "completely false" and "a malicious PR operation" aimed at undermining Trump's recent trade accord with Beijing.
Several of the firms cited by the Pentagon occupy key roles in advanced technology supply chains. Innolight and Eoptolink are major producers of optical transceivers critical for linking AI chips in large clusters and are identified as ecosystem partners by Nvidia Corp. RoboSense, a major supplier of sensors for autonomous driving and robotics, is also listed as a partner in Nvidia's autonomous-driving platform.
Broader Implications of a 1260H Listing
First published in 2021, the Section 1260H list now contains more than 130 companies alleged to have ties to China's military, spanning aviation, construction, logistics, hardware manufacturing and telecommunications.
Law firm Hogan Lovells notes that inclusion on the list can carry "direct and indirect implications," such as limitations on U.S. defense-related contracts, potential spillover onto other restricted-entity lists, reputational damage and heightened compliance burdens for U.S. partners and investors.
As Washington and Beijing continue to clash over technology and national security, the Pentagon's latest conclusions highlight how major Chinese tech firms remain under intense scrutiny — even as the two governments work to stabilize broader economic ties.
