65 Chinese Companies Added to the U.S. 1260H List, PLA Military-Civil Fusion Under Scrutiny

On June 8, the U.S. Department of Defense updated the 1260H "Chinese Military Companies" list. One easily overlooked detail is that this time, it not only included traditional military industrial groups but also reintroduced civilian technology companies such as Alibaba, Baidu, BYD, Yangtze Memory Technologies, Changxin Memory Technologies, SenseTime, Hesai, Yush Robotics, and Autel drones into the same table. According to the law firm WilmerHale, this round added 65 entities covering artificial intelligence, automotive and battery, semiconductors, robotics, drones, communications, solar energy, and biotechnology. This list itself is not a sanctions list, but starting from the end of June, U.S. defense procurement restrictions will become stricter, and will continue to tighten in 2027.

The Expansion of the List Indicates the U.S. Focuses on Supply Chains Rather Than Individual Weapons

The U.S. Department of Defense repeatedly uses the framework of "military-civil fusion contributors" in its documents. The reasons given for Alibaba and Baidu are their indirect connections with the Ministry of Industry and Information Technology or the state-owned enterprise system; for BYD, the reason is its connection with the Ministry of Industry and Information Technology and its location or association with military-civil fusion industrial parks; for drone companies like Chengdu Zongheng Automation, the reasons are more direct, involving both the Ministry of Industry and Information Technology and mentioning connections to the PLA. In simple terms, the U.S. is not asking whether these companies produce missiles, but whether the data, computing power, sensors, communication modules, and platform software they possess can enter the PLA's modernization chain.

This also reflects a change in Washington's assessment of China's military industrial capabilities in recent years. In the past, the focus was on major contractors in military uniforms such as Aviation Industry Corporation of China, China Aerospace Science and Industry Corporation, China North Industries Group Corporation, and China Shipbuilding Industry Corporation. Now, the real concern is the intermediate layer: cloud computing training models, lidar for unmanned platform perception, batteries and electric drive systems determining the endurance of unmanned vehicles, and industrial software and chips determining production rhythms. I believe this intermediate layer is more worth watching than individual models because it determines whether China can transition its equipment from prototypes to mass production.

The U.S. Assessment Has Rigid Logic but Also Roughness

The rigid logic lies in the fact that modern warfare increasingly resembles a distributed industrial system. The PLA's need for long-range precision strikes, intelligent command, unmanned swarms, and battlefield perception relies on the foundational capabilities of civilian technology companies. A recent article from the Perry World House at the University of Pennsylvania also mentioned that advanced U.S. chips might be used by the Chinese military for military systems through third-party channels, and civilian large model training hardware might indirectly support the PLA's use of AI tools. This assessment is not exaggerated; terms like "intelligent decision support," "large model applications," and "unmanned equipment identification" can already be seen in public tenders.

However, the roughness is also quite evident. Placing a large platform company, an electric vehicle manufacturer, and a company directly producing military drones on the same list does not reflect the same level of risk. For example, BYD's batteries, electric drives, and automotive-grade chips do have dual-use attributes, but that does not mean every production line serves the PLA. Baidu's autonomous driving, mapping, and AI capabilities can be militarized, but that does not mean it has taken on a prime contractor role in specific weapon projects. This U.S. list resembles a "potential capability map" rather than a project list with a complete chain of evidence.

The Real Impact on Chinese Military Industry Lies in Financing and Procurement Expectations

In the short term, the 1260H list will not immediately cause these companies to completely lose the U.S. market. Companies like Alibaba, Baidu, and BYD have denied any improper connections with the military, and the Chinese Ministry of Commerce also expressed strong opposition on June 13, stating that the U.S. is generalizing the concept of national security. However, in the medium term, the impact will be transmitted from three directions: first, U.S. defense contractors will proactively clean up their supply chains; second, universities and laboratories will be more cautious in joint research, cloud services, and sensor procurement; third, the capital market will factor in the possibility of "continued sanctions" into valuations.

This may not be entirely bad for the Chinese military industrial system. After external blockades, domestic replacements will accelerate, and military state-owned enterprises will be more willing to bind with local private enterprises. But the problem is that military-civil fusion is not simply about moving civilian products into the military. Military reliability, confidentiality reviews, battlefield maintenance, and extreme environment testing all need to be redone. Civilian AI companies excel at rapid iteration, while military procurement systems are adept at layered acceptance, and the rhythms of the two do not naturally match. This adjustment cost is often underestimated in domestic discussions.

What Should Be Focused On Are Small Giants and Industrial Parks

Interestingly, U.S. documents repeatedly mention "small giants" and "military-civil fusion industrial parks." This is more analytically valuable than naming large companies. Those that can truly fill the gaps in the PLA are often not public targets like Alibaba and Baidu, but small enterprises that produce inertial navigation systems, optoelectronic pods, millimeter-wave radars, communication modules, composite materials, and industrial mother machines. They may not be large in scale, but they are positioned at critical nodes in the equipment system.

Therefore, the core signal of this list is not "the U.S. is sanctioning Chinese companies again," but rather that the U.S. is shifting its observation of Chinese military industry from group companies to the technological ecosystem. The next questions worth asking are more specific: If the U.S. continues to dig down along the lines of "small giants" and industrial parks, how long can those truly low-profile second and third-tier suppliers in the Chinese military supply chain maintain their international procurement and financing channels?

Main Sources

• U.S. Department of Defense June 8, 2026 1260H list update document
• Associated Press June 13 report on China's opposition to the U.S. listing multiple large companies as military companies
• WilmerHale June 11 legal analysis on the addition of 65 entities and procurement restrictions for 2026 and 2027
• Perry World House June 15 analysis on U.S. semiconductors and Chinese AI military applications