In America: Alibaba Sues US DOD Over “Chinese Military Company” Designation

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Last month, the US Deputy Secretary of Defense added several Chinese companies, including tech giant Alibaba, to a list of companies owned by the Chinese Communist Party (CCP) or that work with the Chinese government’s military-civil fusion (MCF) strategy. BYD, a Chinese car manufacturer, and Baidu, a Chinese tech company, were also included on last month’s update to the DOD list. Being added to this list carries severe reputational damage and restricts these companies from receiving US Department of Defense (DOD) contracts or working with companies engaged with the US military. 

A spokesperson from the Chinese embassy in Washington, D.C. bashed the DOD list as discriminatory. 

“Chinese companies that do business overseas have been strictly observing laws and regulations of their host countries. The US should stop its wrong practice and create a fair, just and non-discriminatory environment for Chinese companies.”

Part of the US’s grand strategy to manage China’s rise is to contain it through tariffs, sanctions, and technology restrictions. As such, the DOD was asked to compile a list of companies that threaten US national security due to their direct or indirect involvement with the CCP. For the US, these actions are seen as defensive and ultimately preventative in nature. For China, these actions are seen as aggressive and uncalled for. 

One reason for the divergence of perspectives on the DOD list is that tech companies like Alibaba are increasingly viewed as frontrunners not only in technological advancement but also in translating these advancements for military use. One needs to look no further than how drone warfare and developments in AI have revolutionized how the ongoing Russia-Ukraine war has played out. 

In the past, tech companies like Alibaba and Huawei were largely seen as economic competitors with US tech giants like Apple or Amazon. Now, the same tech infrastructure and intellectual property (IP) that these companies own and operate are becoming significant assets, increasingly embedded in the very fabric of people’s lives. It is not too difficult to see how either the US or China could perceive a national security threat from becoming too deeply entangled with its competitor’s tech companies. 

Likewise, Beijing immediately responded to the inclusion of companies like Alibaba onto the US DOD list with reciprocal sanctions on 10 US companies. These sanctions target “dual-use” trade goods that can be used for both military and civilian purposes. Another set of informal sanctions also prohibited Chinese government entities from buying products from 46 US companies. George Chen, partner for Greater China at the advisory firm The Asia Group, commented on Beijing’s sanctions.

“Most of them are U.S. defense industry players or they have close connections with the U.S. government for contracts and other reasons. Those companies are not going to do business in China, so the impact will be quite symbolic.” 

Alibaba also filed a largely symbolic petition in a US District Court in San Jose last month. It is unlikely that this petition will succeed in court due to the politically sensitive nature of the DOD list and US-China relations. 

“The determinations have no basis in fact or law. Alibaba is governed by an independent board, none of whom has any military affiliation. Its products and services are built for retail, logistics, and enterprise information technology — not weapons, defense, or intelligence.” – Alibaba in their petition filed in US District Court

A core part of Alibaba’s argument is that Alibaba is not engaged with the Chinese military nor does it take part in the MCF. Alibaba is often equated to being the “Amazon of China.” This means that Alibaba is a Chinese tech giant that has built most of its wealth through e-commerce, logistics, business-to-business wholesale, and cloud computing. From their perspective, Alibaba is being unfairly shut out from business with US companies or US-affiliated companies.  

However, Alibaba’s tech infrastructure, which supports its entire business, also enables the development and use of AI. This dual-use capability becomes highly sensitive when viewed in the context of the broader AI race between the US and China. Last year, Chinese startup DeepSeek launched an advanced AI model that reportedly operated at lower costs and higher energy efficiency than US competitors. 

Additionally, the US claims that companies like Alibaba are fairly included on the DOD list because it is affiliated with China’s Ministry of Industry and Information Technology (MIIT). Similar to how the social media app TikTok and telecom giant Huawei have generated national security controversy, Alibaba now finds itself in the same boat of “Chinese Military Company.” 

Regardless of how credible the US’s claims are, these actions reflect a renewed wave of economic tensions between the US and China following last year’s trade war. When framed within the context of the great power competition between the US and China, the DOD’s “Chinese Military Company” list appears more prudent rather than unjust. 

Indeed, a report from the Intelligence and National Security Alliance (INSA) found that Chinese IP theft costs between $300 and $600 billion annually. This report also highlighted how 20% of US companies claimed that entities affiliated with China have stolen their intellectual property. 

Overall, the latest phase of tensions between the US and China continues amidst the AI race and concerns over national security. Chinese tech companies like Alibaba, Huawei, and TikTok will need to give greater assurances that they have no affiliation with the Chinese government or risk remaining on the DOD list.