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Alibaba has asked a US court to order the Pentagon to remove it from a list of groups it says have Chinese military ties, days after Beijing took retaliatory action against the defence department’s decision.
The Chinese ecommerce giant told a California district court in a lawsuit that the Pentagon had not provided “substantial evidence” to justify its inclusion on a “Chinese military companies” blacklist.
The Pentagon recently added Alibaba and other high-profile Chinese companies, including the world’s largest electric-vehicle manufacturer BYD, to the so-called 1260H list. The congressionally mandated blacklist includes Chinese companies with alleged ties to the People’s Liberation Army that undermine US national security.
“Alibaba is not a Chinese military company nor part of any military-civil fusion strategy,” the company said on Tuesday, referring to a Chinese requirement for companies to share technology with the PLA.
Alibaba described its inclusion on the list as “arbitrary and capricious” in the lawsuit and said the Pentagon failed to consider “substantial contrary evidence” it had provided to counter claims about PLA connections.
The Pentagon said it did not comment on ongoing litigation.
The FT in November reported the White House had concluded Alibaba had provided technological support for Chinese military “operations” against unspecified US targets. The claim, which the company strongly denied, came in a White House memo obtained by the FT that was based on declassified “top secret” intelligence.
Alibaba’s lawsuit follows a petition in another US district court by WuXi AppTec, a Chinese biotech group with substantial US operations, to be removed from the 1260H list. In a letter to customers, WuXi said it was “confident this designation is wrong and unsupported by the facts or legal criteria”.
Inclusion on the blacklist does not have immediate legal implications for most of the companies. However, it creates reputational risk by signalling that the US may later take punitive action. Some members of Congress want US stock exchanges to delist Chinese groups on the blacklist.
In its filing, Alibaba said being included on the list exposed it to restrictions in US states that rely on federal designations to make decisions about divestment regimes.
“A federal designation of Alibaba as a ‘Chinese military company’ materially increases the likelihood that the company’s securities — listed on the New York Stock Exchange — become subject to such state divestment mandates,” it said.
The designation creates a big issue for WuXi because the Biosecure Act, which Congress passed last year, bars the US government from doing business with any biotech company on the 1260H list after a five-year grace period.
In another new repercussion, the latest National Defense Authorization Act prohibits the Pentagon from entering business relations with groups that lobby or provide advocacy services for Chinese companies on the list.
The provision comes into effect next week. Alibaba retained the law firm Sidley Austin to represent the group in its case against the Pentagon.
Earlier this week, China restricted commerce with several US companies, including some in the rare earths industry, in retaliation for the Pentagon having added several marquee Chinese companies to the blacklist.
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