Fire on the USA-China line. Pentagon accuses Chinese companies of ties to the government
Alibaba Group, a Chinese e-commerce company, filed a lawsuit against the U.S. government, challenging the listing of the company on the list of entities linked to Chinese armed forces.
The case accelerated after June 8 when the U.S. Department of Defense expanded the list to 188 companies suspected of supporting the military with their technology.
According to Reuters, Alibaba is accused of contributing to the “integration of the military and civilian sectors within the framework of China’s defense industry base” through its ties to the Chinese Ministry of Industry and Information Technology.
Additionally, the Pentagon pointed to Alibaba’s indirect links to the State Administration of the State-Owned Assets Supervision and Administration Commission of the State Council, better known as SASAC.
The Chinese company disputed the allegations and demands its removal from the list.
“These findings have no factual or legal basis. Alibaba is managed by an independent supervisory board whose none of the members have any ties to the military,” the company, quoted by Reuters, said.
“Its products and services are intended for retail, logistics, and corporate information technology, not for the arms, defense, or intelligence industry,” added the statement.
The company notes that being linked to Chinese defense industry could negatively affect its reputation.
“For many U.S. companies, Alibaba is the main gateway to the Chinese market. Labeling Alibaba as a Chinese military company means recognizing it as a tool of Chinese armed forces and a threat to U.S. national security,” we read.
“This classification… directly undermines Alibaba’s reputation and casts a shadow over all its relationships in the United States,” added the statement.
Alongside Alibaba, the Defense Department list also includes the search engine Baidu, electric car manufacturer BYD, and biotech firm WuXi AppTec, which also filed a similar lawsuit on June 11.
Information from CNBC indicates that China retaliated by implementing an export ban on dual-use goods for 10 U.S. entities and excluding 46 U.S. firms from government procurement.
“Being listed on 1260H does not trigger immediate sanctions, but it prevents the U.S. Department of Defense from awarding direct contracts to the listed companies from June 30, and from 2027 restrictions on indirect contracts will be introduced,” we read.
“This entry will likely deter other federal agencies and commercial partners from doing business with companies on the list,” added the statement.
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Alibaba shares at a 30% discount
Alibaba shares closed down 2.26% to $102.60 on Tuesday, June 22.
The next day shares fell 0.94% to 101,64 USD.
Since the beginning of the year, Alibaba’s prices have fallen by almost 33%.
Chart. Alibaba share price
Source: TradingView.
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Sources: Reuters, CNBC.
