Shares of Alibaba Group Holding Ltd. led a sell-off in Chinese tech stocks after the Pentagon added some of China's largest companies to a list of those aiding the military, but then, minutes later, withdrew the list without explanation, UNN reports, citing Bloomberg.
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Shares of the Chinese AI leader fell more than 3% in Hong Kong, while shares of BYD Co. and Baidu Inc. dropped about 1%. All three companies were included in an updated Pentagon list in the U.S. Federal Register, though it was later declared "unpublished." The agency also removed two Chinese memory chip leaders, ChangXin Memory Technologies Inc. and Yangtze Memory Technologies Co., from the list.
The Pentagon's actions come at a tense moment in Washington's debate over China's technology policy. The U.S. has now stated that three Chinese AI leaders — Alibaba, Baidu, and Tencent Holdings Ltd. — are assisting the Asian country's armed forces, the publication writes. Their inclusion will almost certainly provoke Beijing, the publication notes. The inclusion of BYD on this list, meanwhile, targets the country's leading electric vehicle company, the publication indicates.
While the list does not carry immediate legal consequences, the Pentagon increasingly uses it to restrict companies' ability to contract with the military or receive research funding. The so-called 1260H designation also serves as a warning to American investors and is widely seen as a red flag that could precede tougher trade restrictions.
Alibaba stated in its statement that it "is not a Chinese military company and does not participate in any military-civil fusion strategy. We will take all available legal actions against attempts to misrepresent information about our company."
A Baidu spokesperson said in a statement: "We strongly reject the inclusion," which "has no compelling basis." "The assumption that Baidu is a military company is completely unfounded, and no evidence has been presented to prove otherwise."
Shenzhen-based BYD did not respond to a request for comment sent outside of normal business hours.
The 1260H list, first published in 2021, now includes more than 130 entities accused of collaborating with the Chinese military. It includes names of airlines and computer hardware manufacturers, as well as companies in the construction, shipping, and telecommunications industries.