The Pentagon on Jan. 31 added over a dozen Chinese tech firms to its backlist of companies with ties to the Chinese military.
Among new companies added include memory chip maker YMTC, artificial intelligence company Megvii, drone maker Chengdu JOUAV, lidar maker Hesai Technology, and tech company NetPosa, according to the Department of Defense (DOD).
Updating the list is “an important continuing effort in highlighting and countering” the Chinese Communist Party’s military-civil fusion strategy, the Pentagon stated in a press release.
This “strategy supports the modernization goals of the People’s Liberation Army (PLA) by ensuring it can acquire advanced technologies and expertise” developed by Chinese companies, universities, and research programs that appear to be civilian entities, the DOD added.
The latest additions have brought the total to over 70 Chinese firms on the list designated by the United States as Chinese military companies. The list has already included major Chinese companies, such as Huawei, chipmaker SMIC, aviation company AVIC, BGI Genomics Co, China Mobile, energy company CNOOC, and China Railway Construction Corp.
The designation is required by Section 1260H of the National Defense Authorization Act, which directs the Secretary of Defense to update a list of Chinese military companies annually until Dec. 31, 2030. The Pentagon started the list in June 2020.
Earlier, on Jan. 29, GOP senators sent a letter to Secretary of Defense Lloyd Austin, pushing the DOD to publish the list. The letter raised concerns over DOD’s failure to release the list as required. It also asked the Pentagon to “update on the process for determining how the Department of Defense develops, updates, and publishes the list.”
“China’s efforts threaten the trust, transparency, reciprocity, and shared values that underpin international science and technology collaboration and fair global business practices,” the senators noted. “In a secretive and exploitative manner, China is acquiring the intellectual property, key research, and technological advancements of the world’s citizens, researchers, scholars, and private industry in order to advance its military aims,” they said.
“The Defense Department’s updated 1260H list underscores China’s unwavering commitment to its military-civil fusion strategy,” said Craig Singleton, a senior fellow at the Foundation for Defense of Democracies.
“Being listed on 1260H poses major reputational risks to Chinese companies,” he added, noting that some Chinese firms have tried to be removed from the list.
While being placed on the list doesn’t involve immediate bans, it can be a blow to designated companies’ reputations and represents a stark warning to U.S. entities and companies about the risks of conducting business with them. It could also add pressure on the Treasury Department to sanction the companies.
Preventing Investment in the Chinese Military
In November 2020, President Donald Trump issued Executive Order 13959 to halt investments in companies with ties to China’s military, citing threats to national security.President Joe Biden later expanded on the order in June 2021 with Executive Order 14032, which prohibited U.S. investments in companies affiliated with China’s military or surveillance industries. He said the Chinese regime’s strategy of “military-civil fusion” was to blame, as it requires civilian companies in China to directly contribute to the regime’s military and intelligence activities.
The Chinese regime’s “military-industrial complex ... continues to constitute an unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, and economy of the United States,” President Biden noted.
In August, President Biden also signed an executive order banning outbound U.S. investments in key technologies that “significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities” in China.
U.S. lawmakers also have introduced congressional measures to prevent and track U.S. investments in Chinese companies that help the Chinese regime strengthen its military.
In July, Sen. Bob Casey (D-Pa.) and Sen. John Cornyn (R-Texas) introduced the “Outbound Investment Transparency Act.” The legislation requires American firms to notify the Treasury Department if they have investments in Chinese firms with sensitive technologies, including semiconductors, artificial intelligence, quantum computing, and hypersonics, over national security concerns.
