Pentagon Names 9 New Chinese Companies With Ties to Chinese Military

A man holds a smartphone in a file photograph. Gabriel Bouys/AFP via Getty Images

The U.S. Department of Defense on Jan. 14 added nine Chinese companies to a growing list of companies with ties to the Chinese military.

Among the nine companies were cellphone maker Xiaomi, semiconductor equipment maker Advanced Micro-Fabrication Equipment (AMEC), chip designer GOWIN Semiconductor, state-owned China National Aviation Holding, and aircraft manufacturer Commercial Aircraft Corporation of China (Comac), according to a press release from the Pentagon.

The latest additions mean the United States has designated a total of 44 Chinese companies as those with links to the Chinese military, formally known as the People’s Liberation Army.

On Friday, Xiaomi’s shares tumbled 10.26 percent to close at HK$29.3 ($3.78) on the Hong Kong Stock Exchange.

Meanwhile, AMEC’s shares took a small dip on Friday, dropping 3.14 percent on the Shanghai Stock Exchange to close at $175.36 yuan (about $27).

Last year, 35 Chinese companies were listed, including telecom giant Huawei, semiconductor chipmaker SMIC, defense contractor AVIC, railcar-maker CRRC, and surveillance camera maker Hikvision. The designations were made under a requirement in section 1237(b) of the National Defense Authorization Act, the annual defense spending bill.

All of these companies are now subjected to a new U.S. investment ban, requiring U.S. investors to divest their holdings of securities of the blacklisted companies by Nov. 11, 2021. U.S. trading of securities in these companies is also prohibited after the ban went into effect on Jan. 11.

President Donald Trump signed an executive order (pdf) on Nov. 12 last year announcing the investment ban. He issued an amendment order on Jan. 13 strengthening the ban.

“The Department is determined to highlight and counter the People’s Republic of China’s (PRC) Military-Civil Fusion development strategy,” the Pentagon stated in the press release.

That strategy “supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities,” the Pentagon added.

The Trump administration has repeatedly warned about the Chinese Communist Party’s (CCP) efforts to leverage this strategy to acquire U.S. intellectual property. The strategy is now overseen by a Chinese government agency called the Central Commission for the Development of Military-Civil Fusion, established in 2017.

“The CCP is implementing this strategy, not just through its own research and development efforts, but also by acquiring and diverting the world’s cutting-edge technologies—including through theft—in order to achieve military dominance,” the U.S. State Department describes on its website.

AMEC and Xiaomi have since each issued a statement denying their ties to the Chinese military.

Reuters contributed to this report.