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 move roiled the shares of the affected listed companies and left analysts wondering about the intentions of the US President Donald Trump’s administration. If the list is reposted, they said it could be a show of strength ahead of Trump’s expected trip to China.
The Pentagon said in a statement to Bloomberg News that “we have nothing to announce at this time.”
Photo: REUTERS
Alibaba’s US depositary receipts shares fell as much as 5 percent in extended trading on Friday, while Baidu’s receipts were down 4.5 percent.
The updated list, while briefly posted, removed two of China’s champions in production of memory chips, ChangXin Memory Technologies Inc and Yangtze Memory Technologies Co, in another move that puzzled analysts.
While being added to the list carries few major legal repercussions, the Pentagon is increasingly using the list to restrict companies’ abilities to contract with the military or to receive research funding. A 1260H designation serves as a red flag to US investors and is widely considered a warning sign that can precede more punitive trade restrictions.
Alibaba said in a statement that it is “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 of Baidu on the list,” 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. We are a publicly-listed company and our products and services are designed for civilian use. We will not hesitate to use all options available to us to have the company removed from the list.”
Alibaba and Baidu are among China’s champions in artificial intelligence and their addition is almost certain to provoke Beijing. After Bloomberg reported earlier this year that the Pentagon was considering such a step, China’s Ministry of Foreign Affairs urged the US “to immediately correct its erroneous actions and will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.” The designation of BYD targets China’s top electric vehicle company.
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 airline, construction, shipping, computer hardware manufacturing and communication companies.
The Pentagon move comes at a particularly fraught time in Washington’s debate over China tech policy. The US has now said that three of China’s AI champions — Alibaba, Baidu and Tencent Holdings Ltd — aid China’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 would stall the advance of Chinese chipmakers such as Huawei Technologies Co. Opponents of such sales, which have yet to be green-lit by Washington or Beijing, say that they could end up benefiting China’s military — a possibility Nvidia has dismissed.
Secretary of Commerce Howard Lutnick, asked in a Senate hearing about how his agency would ensure that does not 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’ll leave that opinion to the president.”
To China hawks in and outside the administration, that is hardly assuring. China’s People’s Liberation Army 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 China chip curbs when he served in the Trump and Biden administrations.
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