Pentagon Blacklists Alibaba, Baidu, BYD; Beijing Objects
16h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
us-china-tradedefense-stocksblacklist
Fazen Markets Editorial Desk
Collective editorial team · methodology
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The United States Department of Defense added several major Chinese technology firms, including Alibaba, Baidu, and BYD, to its list of entities allegedly supporting China’s military modernization. Beijing’s foreign ministry stated it is "strongly dissatisfied" with the move, which was announced on June 13, 2026. The designation immediately pressured US-listed shares, with Alibaba's stock dropping 2.22% to $112.82 in early trading.
The Pentagon’s list, formally known as the 1260H list, originated from the 1999 National Defense Authorization Act. It identifies companies the US government alleges are "Chinese military companies" operating directly or indirectly in the United States. A previous major expansion occurred in June 2021, when the list grew to 59 companies, including Huawei and SMIC.
This action occurs amid protracted trade negotiations between Washington and Beijing. Talks have recently stalled over issues including technology transfer rules and intellectual property protections. The current macro backdrop features heightened sensitivity to Sino-US relations, influencing global tech supply chains and investment flows into Chinese equities.
The catalyst is an ongoing US regulatory effort to limit perceived national security risks from Chinese technological advancement. The Department of Defense periodically reassesses companies based on their ownership structures, technological exports, and partnerships with Beijing’s military-civil fusion strategy.
Immediate market reactions were negative for the named Chinese equities trading on US exchanges. Alibaba Group Holding Ltd (BABA) traded down 2.22% to $112.82 as of 11:57 UTC today, after touching an intraday low of $110.98. Baidu Inc (BIDU) declined 1.46% to $115.77, with its session range between $114.70 and $117.38.
The sell-off contrasted with the broader market’s performance. The Invesco Golden Dragon China ETF (PGJ), a key benchmark for US-listed Chinese companies, was down approximately 1.8% at the same time, underperforming the flat Nasdaq Composite Index.
Previous similar designations have resulted in sustained volatility. Following the June 2021 list expansion, the PGJ ETF declined over 5% in the subsequent week. The current list now encompasses over 70 companies, spanning sectors from artificial intelligence and semiconductors to aerospace and new energy vehicles.
| Ticker | Price | Daily Change | 52-Week Range |
|---|---|---|---|
| BABA | $112.82 | -2.22% | $78.11 - $145.97 |
| BIDU | $115.77 | -1.46% | $92.51 - $128.64 |
The designation’s primary second-order effect is increased scrutiny and potential restrictions for these firms. US institutions and investors may face pressure to divest holdings, creating sustained selling pressure on ADRs. Semiconductor capital equipment firms like Applied Materials (AMAT) and Lam Research (LRCX) could see reduced orders if Chinese tech investment slows.
US defense contractors may experience a countervailing benefit. Increased geopolitical tension often supports defense spending narratives, potentially buoying stocks like Lockheed Martin (LMT) and Northrop Grumman (NOC). The iShares U.S. Aerospace & Defense ETF (ITA) is a key sector proxy to watch.
A key limitation is that the list itself does not impose immediate sanctions or blocking measures like the Entity List managed by the Commerce Department. Its immediate impact is largely reputational, though it often precedes more stringent regulatory actions. Flow data indicates hedge funds were already net short Chinese tech ADRs ahead of the announcement, suggesting the move was partially anticipated.
The next major catalyst is the scheduled US-China trade talk round on June 20, 2026. This event will test whether this development derails diplomatic progress or is addressed as a negotiating point. Second, earnings from Alibaba and Baidu in late July will provide the first financial read on any operational impact from the listing.
Technically, BABA shares are testing a key support level around $110, which has held since May. A decisive break below this level could trigger further selling toward the $105 zone. For the PGJ ETF, the $28 level represents critical support; a break below it would signal a bearish trend resumption.
Monitor the VIX term structure for any sign of escalating geopolitical risk premium being priced into US equity volatility. Any further expansions of the list to include financial institutions or commodity firms would signify a significant escalation.
The 1260H list is a public roster maintained by the US Department of Defense that names entities it considers to be "Chinese military companies." The legal authority comes from the 1999 National Defense Authorization Act. Inclusion does not trigger automatic sanctions but prohibits US investment in these companies’ securities by certain pension funds and can lead to further regulatory action.
The Entity List, administered by the Bureau of Industry and Security (BIS), imposes strict license requirements for US firms to export specified items to listed entities, effectively blocking access to critical US technology. The Pentagon’s 1260H list is primarily an investment and public shaming tool, though it often serves as a precursor to an Entity List designation.
For most retail and institutional investors, direct trading is not immediately prohibited. However, certain US government pension funds are legally required to divest holdings in companies on the list. The greater risk is reputational, potentially leading to wider divestment campaigns, increased volatility, and the possibility of future, more restrictive sanctions that could impact liquidity or valuation.
Geopolitical friction over technology competition is escalating US regulatory risks for Chinese equities.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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