US Government to list Alibaba, Baidu, and BYD as "Chinese military companies"

The US Department of Defense apparently believes that Alibaba, Baidu, and BYD are aiding the Chinese military and should therefore be added to a list that represents "an important warning for US investors." This is reported by the financial news agency Bloomberg, which also notes that it is not known whether the three corporations have actually been added to the so-called "1260H list." The Pentagon reportedly informed the US Congress about its assessment on October 7, which was before a fundamental agreement between the US and China in the trade dispute. Inclusion on the list has no legal consequences for companies, but it can affect their stock prices.

No severe consequences recently

According to Bloomberg, Congress was informed of the assessment by Deputy US Secretary of Defense Stephen Feinberg. In addition to the online retailer, the internet giant, and the electric car manufacturer, five lesser-known companies would also have to be added to the list. It is updated annually, with the most recent update occurring in January, shortly before Donald Trump took office. Tencent, among others, was added to the list at that time, which led to a drop in its stock price. However, it has long since recovered and is significantly in the black this year.

According to Bloomberg, Alibaba and Baidu have already vehemently rejected the classification, and it would have no consequences for their own business. China's Ministry of Foreign Affairs has also criticized the report. Furthermore, it is unclear whether the US government's assessment has changed since the agreement in the trade dispute. The news agency, meanwhile, refers to an analysis by a law firm, according to which inclusion on the list has "various direct and indirect consequences." For example, it would be more difficult to secure US military contracts; affected companies could end up on further lists with more far-reaching consequences, and they would have to spend money to counter the reputational damage.

The background to this measure is a US law from Donald Trump's first term as US President. It obliges the US Secretary of Defense to create and publish an annual list of "Chinese military companies" by December 31, 2030. The original goal was to prevent US investments in these Chinese firms. Joe Biden expanded the mandate in 2021 and to have further companies added to the list. How this will proceed in light of developments in the trade dispute remains unclear. The next update of the list is not expected until early next year.

(mho)