Chinese tech titan Alibaba filed suit against the U.S. Department of War on Wednesday, arguing there was “no basis in fact or law” for the Pentagon to label it as a “Chinese military company” earlier this month.
The Department of War maintains a list of companies that perform services for the People’s Liberation Army (PLA) of China, known as the “1260H List” after the legislation that created it. Since 2021, the list has been updated and refined to paint a full picture of China’s fusion between “private” firms and its military-intelligence complex.
The Pentagon added several big corporate names to the list on June 8, including Alibaba. The listed companies, and the Chinese government, objected to the designations as unfair and arbitrary.
“The U.S. should stop its wrong practice and create a fair, just and non-discriminatory environment for Chinese companies,” the Chinese embassy in Washington said, as soon as the updated 1260H list was announced.
Alibaba was particularly aggressive in claiming that it was “not part of any military-civil fusion strategy,” and immediately declared its intention to “take all available legal action against attempts to misrepresent our company.”
Alibaba made good on that threat with a petition to the San Jose division of the U.S. District Court in the Northern District of California. Another Chinese firm, WuXi AppTec, filed its own challenge in the District of Columbia on June 11.
Both Chinese companies claimed they have suffered damages from what they viewed as an unfair designation. Alibaba said it was losing business partners in America, which could severely hinder its U.S. ventures.
A key issue in the lawsuit was Alibaba’s challenge to the Pentagon’s claim that the company is linked to China’s State-Owned Assets Supervision and Administration Commission (SASAC) and Ministry of Industry and Information Technology (MIIT).
SASAC is an agency controlled directly by the powerful State Council of China. It manages the “shares” owned by the Chinese Communist government in partly-independent companies, as well as assets that are fully owned by the state.
When Alibaba was added to the 1260H list, the Pentagon said it was “indirectly affiliated” with SASAC, while its ties with MIIT make it a “military-civil fusion contributor to the Chinese defense industrial base.”
Alibaba’s suit contents it is merely “regulated” by those agencies, not “affiliated” with them, and it has no choice about complying with their regulations.
“The relationship is no different from Alibaba’s dealings with United States government agencies. A regulator is not an affiliate,” the company contended.
The Chinese company further claimed its designation interferes with its First Amendment rights, because lobbyists that work for companies on the 1260H list can be restricted from doing business with the Department of War.
“The designation thus does not merely impose commercial costs – it strips Alibaba of its ability to speak, to petition the government through its chosen representatives,” the petition said.
On Monday, the Chinese government added ten American firms to its export control list, seemingly in retaliation for Alibaba and other firms being placed on the 1260H list.
Chinese state media said the move was “a response to Washington’s repeated weaponization of unilateral sanctions and entity lists to suppress Chinese enterprises, including its groundless addition of Chinese firms to its so-called military-industrial entity list.”