US deems more Chinese tech companies ‘military’ and a national security risk

The Pentagon on Wednesday labelled more than a dozen Chinese tech firms, including memory-chip maker Yangtze Memory Technologies Corp (YMTC), as “military companies” that pose a national security risk to the US.

Artificial intelligence companies Yitu Technology and Beijing Megvii, drone maker Chengdu JOUAV, lidar maker Hesai Technology and tech company NetPosa are also entities that operate in the United States but have ties to the Chinese military, according to the US Defence Department.

They join Shenzhen-based consumer drone maker DJI Technology and China’s leading genetics firm, BGI, on what is called the 1260H list, which makes US and international companies aware of entities that could be supporting Beijing’s military-industrial complex.

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First established under the National Defence Authorisation Act for fiscal year 2021, the 1260H list is updated annually by the Defence Department.

US further restricts China from AI chips to hinder military development

Being named on the list does not involve a complete ban, but it does render the firms ineligible for Defence Department contracts. Additionally, the label could lead to blacklisting by the US Treasury Department, curbing the companies’ business prospects.

A spokesman for China’s embassy in Washington, Liu Pengyu, said that the US was “overstretching” national security and “abusing” state power, and that the moves would “ultimately undermine the US’ own interests.”

“They run counter to the US’ alleged commitment to market competition and international fair trade, undercut two-way trade and investment flows and discourage foreign investors,” he said.

Three Chinese firms were removed from the updated list on Wednesday: hi-tech electronic components manufacturer Fujian Torch Electron Technology, the China International Engineering Consulting Corp and SMIC Hong Kong International Co Ltd, which makes semiconductors.

However, despite pressure from the US House committee on competition with China, Quectel, a Chinese Internet of Things firm, was not added to the list.

A US House panel says Quectel should be listed as a Chinese military company, subjecting it to investment restrictions. Photo: Handout

Identifying “Chinese military companies” is part of a larger effort by Washington to block US investment in entities developing dual-use technologies, those that can help the Chinese military develop more advanced weapons.

An executive order by President Joe Biden in August banned US private equity and venture capital investments in China that involve sensitive technology like artificial intelligence.

During a congressional hearing on Tuesday, Representative Blaine Luetkemeyer, a Republican from Missouri, called Biden’s move “a step in the right direction” that could be “improved through legislative action, which is more permanent”.

According to Bill Drexel of the Center for a New American Security, a Washington-based think tank, the updated list “stands as a reminder that the Sino-American economic relationship – especially around technology – is continuing to fray, and for good reason”.

He said that while the Chinese Communist Party would not back down from its military-civil fusion strategy, “Americans cannot afford to be naive about the pronounced role that ostensibly private companies in China play in building out China’s military might, with direct strategic implications for American national security.”

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