Alibaba is suing the Pentagon to have itself removed from the list of Chinese military companies.

      Alibaba has filed a lawsuit against the US Department of Defense over a label the company argues it does not merit. In a complaint submitted on Tuesday to the federal court in San Jose, California, the Hangzhou-based firm requested a judge to remove its name from the Pentagon’s list of "Chinese military companies," asserting that the designation has "no basis in fact or law."

      This list is maintained under Section 1260H of the 2021 National Defense Authorization Act, which mandates the Pentagon to identify Chinese companies it believes have direct or indirect connections to the People’s Liberation Army. Alibaba was included on this list on June 8, alongside companies like Baidu, BYD, robotics manufacturer Unitree, and others, bringing the total to 188 entities, up from 134 the previous year.

      In its filing, Alibaba contended that it operates under an independent board with no military affiliations, and that its products and services are designed for "retail, logistics, and enterprise information technology, not for weapons, defense, or intelligence."

      The Pentagon justified the designation in a statement from June, claiming that the company contributes to "military-civil fusion" within the Chinese defense industrial base due to its ties to China's Ministry of Industry and Information Technology, and its indirect connection to the state asset regulator known as SASAC.

      Although the designation does not outright prohibit business transactions with Alibaba, it imposes various consequences. According to the law, the Defense Department will be unable to enter into or renew contracts with listed entities starting June 30, and beginning in 2027, it cannot procure their goods or services through third parties either.

      Government contracts are highly sought after by technology companies, and Alibaba informed the court that the listing creates obstacles to financing, sourcing, and partnerships with American entities, thereby limiting its access to capital and increasing its risk profile. The company also claimed that this action infringes upon its constitutional rights to due process and free speech.

      Alibaba had indicated its intention to challenge the decision. When the June update was issued, a company spokesperson stated that it was "not a Chinese military company or part of any military-civil fusion strategy" and vowed to "take all available legal action." Meanwhile, China’s embassy in Washington labeled the designations as "discriminatory."

      Alibaba is not the only company on the list pursuing legal action. WuXi AppTec, a biotech contract research firm added in the same update, filed a similar lawsuit on June 11.

      Previous instances elicited the same grievances without resorting to litigation; for example, after Tencent was added in January 2025, it described its inclusion as "a mistake." The Pentagon is not obligated to provide evidence, and the criteria for inclusion, based on military-civil fusion, are broad enough to encompass companies primarily focused on consumer technology.

      This broad application is part of the reason the list has been a persistent issue for the Chinese tech sector, which also faces export restrictions on chipmaking equipment and tariffs, as well as the Entity List managed by the Commerce Department's Bureau of Industry and Security, the same bureau involved in an ongoing dispute over access to advanced AI models.

      For Alibaba, which has a cloud division that supports a significant portion of China’s AI infrastructure and has a presence in the US across cloud, advertising, and research, the designation complicates every business relationship with American firms, turning them into compliance challenges.

      The timing of the designation was particularly unfavorable for Beijing, as it coincided with a delicate trade truce. One day before Alibaba filed its lawsuit, China added 10 US firms to its own export control list. The two governments continue to escalate tensions while asserting they are in dialogue.

      The outcome now rests with the court in San Jose, where Alibaba and WuXi will present their cases. The Defense Department has yet to offer a comment. Meanwhile, the contracting bans will take effect at the end of the month, indicating that the practical timeline and the legal process are not aligned. Alibaba is seeking a judicial order to halt both.