China Restricts Exports to U.S. Defense Firms

China announced Monday that it is adding 10 U.S. defense companies to its export control list, restricting business with those firms. The move prohibits Chinese companies from exporting certain dual-use items used for defense and national security capabilities, including drones, robotic hardware, software, and non-military uses.

The companies added to the export control list are: AVEOX, Red Cat Holdings, TealDrones, IMSAR, Jaia Robotics, Ball Aerospace and Technologies, Oshkosh Defense, L3Harris Maritime Services, MP Materials, and USA Rare Earth. According to the Chinese Ministry of Commerce, exporters are prohibited from exporting dual-use items to these entities, and any organization or individual is barred from transferring or providing dual-use items originating in China to these companies.

The Chinese Finance Ministry also announced that 46 U.S. companies, including major defense contractors like Lockheed Martin, Raytheon, General Atomics, Boeing, and General Dynamics, are banned from participating in government procurement projects. Both bans take effect immediately but allow some flexibility for exports deemed 'truly necessary.'

China's new trade restrictions are a response to the Pentagon accusing several Chinese companies of aiding its military earlier this month. The Pentagon updated its list of companies believed to be supporting the Chinese military, blocking the Department of Defense from awarding direct contracts to those firms. The update included additions such as Alibaba Group, Baidu, and BYD.

Experts described Beijing’s orders as a retaliatory measure against the U.S., albeit largely symbolic. Analysts suggest that this move could signal a new front in the ongoing US-China trade war. Despite recent diplomatic efforts to enhance economic cooperation between President Donald Trump and Chinese President Xi Jinping, observers predict further actions from both sides regarding export controls and investment restrictions.

George Chen, partner for Greater China at the advisory firm The Asia Group, said the ban was an unsurprising and proportionate response to the U.S. restrictions. 'Most of them are U.S. defense industry players or they have close connections with the U.S. government for contracts and other reasons,' he said. 'Those companies are not going to do business in China, so the impact will be quite symbolic.'

The Chinese e-commerce company Alibaba has filed a lawsuit against the United States Department of Defense for labeling it as a “Chinese military company.” The court filing contests that designation, arguing that Alibaba is not affiliated with the Chinese military. 'The determinations have no basis in fact or law,' the company said in its lawsuit. 'Alibaba is governed by an independent board, none of whom has any military affiliation.'

Alibaba's products and services are built for retail, logistics, and enterprise information technology—not weapons, defense, or intelligence. The lawsuit was filed in a federal court in San Jose, California, seeking the removal of Alibaba’s name from a growing list of companies blacklisted for alleged affiliations with China’s military.

The Pentagon accused Alibaba of being 'a military-civil fusion contributor to the Chinese defense industrial base because it is affiliated with MIIT,' an acronym for China’s Ministry of Industry and Information Technology. The U.S. added Alibaba to a list of companies believed to be assisting the Chinese military on June 8, along with firms such as BYD and Baidu.