Alibaba, Baidu, and BYD Flagged as 'Chinese Military Company' by Pentagon Over Security Concerns

Three Chinese companies have been controversially added to a list of companies that the United States believes have links to Beijing's military, a development that could spark tensions between the two countries. The three companies added to the list were Alibaba, Baidu, and BYD, all flagged as Chinese military companies by the Pentagon that allegedly pose security risks, according to a Reuters report.

The timing of the release of the updated list was also controversial. It came out barely a month after US President Donald Trump and Chinese Prime Minister Xi Jinping met in Beijing. The meeting between the two leaders was seen as a way to maintain a trade-war truce between their respective countries.

However, with the release of the new list, it appears that was not the case. The listing was branded as discriminatory and an unreasonable act of suppression by China's foreign ministry. The ministry has called on the US to check and re-check the list, believing there may have possibly been an error in the updated version.

Another CMC List Revision Needed

The 1260H, or CMC, list that came out on Monday, 9 June, was already a revised one. It first emerged in February, before being quickly withdrawn for unspecified reasons.

A look at the revised list shows that two companies were no longer included. These were chipmakers CXMT and YMTC.

Of the two companies, YMTC aired disappointment over its inclusion on the list, particularly given that it had been doing business with US authorities for years already. While it acknowledged that national security was a serious concern, YMTC said it believed its brief inclusion was more likely driven by anticompetitive motives than genuine security considerations.

It should be noted that while inclusion on the CMC list does not mean sanctions will be imposed, affected companies will be barred from contracting with the US Department of Defense. It also means the agency will be prevented from buying products or services, even via third parties, from these Chinese companies in 2027.

Flagged Companies Contend Label

Alibaba, Baidu and BYD unsurprisingly condemned the designation and vowed to challenge the labels set by the Pentagon. Beyond doing business in the US, the companies argued that being labelled national security risks also tarnishes their credibility and reputation.

BYD promised to exhaust all administrative and legal means to clear its name and safeguard its interests and development achievements in the US. On the other hand, Alibaba argued that there was no legal basis for being added to the list and vowed to do everything necessary to restore its name and credibility.

Baidu aired the same sentiments shared by Alibaba, vowing to resort to legal measures as well.

'The suggestion that Baidu is a military company is entirely baseless. We will not hesitate to use all options available to us to have the company removed from the list,' an official statement from Baidu read.

With multiple Chinese companies airing their dismay over what they view as the questionable inclusion of their organisations on the list, a revised version from the US Department of Defense could follow. Being removed from the list remains possible, but only once a formal petition for removal is filed.

Inclusion in the CMC list will undeniably have costly repercussions. Although it does not bar companies from operating in the US, they will encounter problems such as investment restrictions and heightened scrutiny, given that they are organisations considered strategically sensitive.

Beyond the US, the label is also likely to be detrimental to the companies' operations in other countries. Doubts may be cast over the affected firms' sincerity due to a tarnished image. Hence, the sooner companies are taken off the list, the better it will be for their long-term interests.