The U.S. Department of Defense (DoD) has updated its Section 1260H list of "Chinese military companies" operating in the United States as part of efforts to counter China’s military-civil fusion strategy.
The People’s Republic of China (PRC) aims to strengthen the People’s Liberation Army (PLA) by integrating civilian research and commercial developments with military objectives. This includes leveraging advanced technologies such as artificial intelligence (AI), quantum computing, biotechnology, and semiconductors.
The U.S. government views this approach as a security challenge. By identifying contributors to this strategy, Washington seeks to limit the PRC's access to dual-use technologies that could bolster its military modernization goals.
The updated list includes prominent firms such as:
Shares of Tencent and CATL dropped in Hong Kong and Shenzhen following the announcement, indicating potential reputational and economic impacts.
While inclusion on the list does not impose immediate sanctions, it carries regulatory and commercial risks. It could hinder U.S. partnerships, affect investor confidence, and heighten scrutiny of these firms’ operations in the United States.
Tencent and CATL have both refuted claims of military involvement, stating it has no connections to military activities. However, the Pentagon asserts that the list highlights companies contributing directly or indirectly to China's military advancements.
The update comes amid rising tensions between Washington and Beijing over technology and national security. The U.S. recently imposed export controls on semiconductors and related technologies to curb China’s progress in AI and weapons development.
Meanwhile, Beijing has announced plans to restrict exports of critical minerals vital for the electric vehicle (EV) industry. The moves underscore the ongoing tech rivalry, with both nations seeking to dominate sectors like AI and green energy.
China’s military-civil fusion strategy dates back to the 1990s but gained momentum under President Xi Jinping, who elevated it to a national strategy in 2014. The PLA, unlike the U.S. military, operates as an arm of the Chinese Communist Party (CCP), requiring Chinese companies to support its objectives.
Experts caution that U.S. firms collaborating with Chinese entities face growing regulatory, economic, and public relations risks. The designation may lead to legal disputes, as seen in the 2021 case involving Xiaomi. The Chinese electronics maker successfully challenged its inclusion on a similar list, arguing that the U.S. lacked substantial evidence. Analysts suggest Tencent could follow a similar legal strategy.