(Feb 14): The Pentagon added Alibaba Group Holding Ltd, BYD Co, Baidu Inc and TP-Link Technologies Co to a list of companies that aid the Chinese military — before withdrawing it minutes later without explanation.
The moves on Friday roiled shares of the affected listed companies and left analysts wondering about the administration’s intentions. If the list is reposted, they said it would be a show of strength ahead of US President Donald Trump’s expected trip to China and meeting with Chinese leader Xi Jinping in April.
The updated list, which the US Federal Register a short while later declared “unpublished”, also removed two of China’s champions in production of memory chips, ChangXin Memory Technologies Inc and Yangtze Memory Technologies Co.
Asked about the notice, the Pentagon said in a statement to Bloomberg News that “we have nothing to announce at this time”.
While the list carries few immediate legal repercussions, the Pentagon is increasingly using it to restrict companies’ abilities to contract with the military or to receive research funding. A 1260H designation also serves as a warning to US investors, and is widely considered a red flag that can precede more punitive trade restrictions.
Alibaba’s and Baidu’s American depositary receipts fell in New York trading on Friday before paring losses later in the day.
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“Releasing the list weeks before a leader-level summit shows deliberate compartmentalisation: stabilising trade talks while sustaining pressure in national security lanes,” Craig Singleton, a senior China fellow at the non-partisan Foundation for Defense of Democracies, told Bloomberg before the list was withdrawn. “Beijing may protest loudly, but it also has to weigh whether escalation now risks undermining a summit it wants to succeed.”
Upon request, the Federal Register later on Friday provided Bloomberg a copy of the letter that it received from the Defense Department requesting withdrawal of the 20-page document and signed by Michael Kremlacek, the acting director of the Pentagon’s Privacy, Civil Liberties, and Transparency Directorate. The letter says the notice was filed for public inspection on Friday and is scheduled to publish on Tuesday.
“We would like to remove this notice from public inspection and withdraw the notice from publication in the Federal Register,” according to the letter. The Register had said the “unpublished” list would remain available through Feb 17.
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Alibaba said in a statement that it’s “not a Chinese military company nor part of any military-civil fusion strategy. We will take all available legal action against attempts to misrepresent our company”.
A Baidu spokesperson said in a statement that “we categorically reject the inclusion”, which has “no credible basis” and that the “suggestion that Baidu is a military company is entirely baseless and no evidence has been produced that would prove otherwise”.
The Baidu statement added that the firm is publicly listed, with products and services designed for civilian use, and that “we will not hesitate to use all options available to us to have the company removed from the list”.
If the notice isn’t reposted, it could be a sign of a broader Trump administration effort to avoid rattling Beijing ahead of Trump’s visit, said Adam Farrar, a senior geoeconomics analyst for Bloomberg Economics. “It may also add to perceptions that the US is further softening its approach in the tech rivalry with China, after allowing H200 deliveries and dialling back proposed export-control changes.”
Alibaba and Baidu are among China’s champions in artificial intelligence (AI), and their addition is almost certain to provoke Beijing. After Bloomberg reported that the Pentagon was considering such a step, China’s Foreign Ministry urged the US “to immediately correct its erroneous actions”.
The designation of BYD, meanwhile, targets China’s top electric-vehicle company. Shenzhen-based BYD didn’t immediately respond to a request for comment sent outside of normal business hours.
An additional point of confusion in the list briefly posted Friday morning in Washington was the inclusion of TP-Link’s Chinese unit rather than its US unit TP-Link Systems, which has come under US scrutiny for the possible national security risks posed by its dominance in the market for wireless routers.
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To be added to the list, a company must operate directly or indirectly in the US, and TP-Link has repeatedly said its US and Chinese operations are completely separate. TP-Link Systems didn’t immediately return a request for comments on Friday, but its founder has previously said the company has nothing to do with the Chinese Communist Party.
A notable absence from the list was Chinese AI start-up DeepSeek, which rattled investors a year ago with the launch of its breakthrough R1 model. In December, a group of US House lawmakers urged the Pentagon to include DeepSeek, claiming the venture had worked with China’s military.
The 1260H list, first published in 2021, now includes more than 130 entities accused of working with the Chinese military. The names include those of airlines and computer hardware manufacturers, as well as firms in construction, shipping and communications.
The Pentagon moves come at a particularly fraught time in Washington’s debate over Chinese tech policy. The US has now said that three of China’s AI champions — Alibaba, Baidu and Tencent Holdings Ltd. — aid the Asian country’s military.
At the same time, Trump’s team is weighing whether to allow Nvidia Corp to sell certain AI chips to those companies and others, on the basis that allowing Nvidia to compete in China will stall the advance of Chinese chipmakers like Huawei Technologies Co. Opponents of such sales, which have yet to be green-lit by Washington or Beijing, argue that they will end up benefiting China’s military — a possibility Nvidia has dismissed.
Commerce Secretary Howard Lutnick, asked in a Senate hearing about how his agency would ensure that doesn’t happen, said that the US government had worked out “very detailed” terms with which Nvidia must comply. Asked whether he trusted that China would honor those terms, Lutnick said, “I will leave that opinion to the president”.
To China hawks in and outside the administration, that’s hardly enough assurance. China’s People’s Liberation Army (PLA) “has deep links into the entire Chinese AI industry — which is why exporting AI chips to these companies, or any other Chinese AI company, would assist the PLA”, said Chris McGuire, a senior fellow at the Council on Foreign Relations who was a vocal proponent of Chinese chip curbs when he served in the Trump and Biden administrations.
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