WASHINGTON – Washington’s most powerful lobbying firms are rushing to cut ties with Chinese tech giants including Alibaba Group Holding and Tencent Holdings as new US restrictions reshape the influence game for many Chinese companies.
Under a law taking effect on June 30, the Defense Department will be barred from working with any company represented by lobbyists who also work for entities blacklisted by the Pentagon for allegedly aiding China’s military. In practice, the provision is forcing lobbyists to choose between representing Chinese businesses or US defense contractors.
Alibaba just lost five lobbying firms, and Tencent lost four, according to a series of disclosures on June 29 and over the past week by Washington power players including Brownstein Hyatt Farber Schreck, Mercury Public Affairs and MO Strategies, all of whom had represented both Chinese tech giants.
“We will be fully compliant with the new Department of War policy,” Marty Obst of MO Strategies said of the new restrictions linked to Pentagon’s roster of Chinese military companies, known as the 1260H list.
Tencent and Alibaba have previously denied working with China’s military and had no comment on the lobbying moves. Alibaba sued the Pentagon last week to seek its removal from the 1260H list. It said in its lawsuit that the new lobbying restriction “has already resulted in several firms and lobbyists indicating that they will end their relationship with Alibaba.”
Sidley Austin – which is representing Alibaba in the lawsuit – and Greenberg Traurig are also no longer lobbying for Alibaba, according to disclosures posted last week. Neither is Holland & Knight, according to an April filing. The firms had no comment. The new restrictions apply to lobbying but not to legal representation.
The decisions to drop Chinese clients highlight the rising importance of the Pentagon’s blacklist as a tool for the United States in its rivalry with China, especially in advanced technologies. Its latest update brought the number of designated companies to 188, up from 20 companies under a predecessor statute a few years ago. The roster spans key sectors including semiconductors, artificial intelligence, robotics and drones.
“Industry has historically not paid attention to the 1260H list because there were no direct compliance requirements. That’s changed,” said Kit Conklin, chief global affairs officer at Exiger, a supply-chain AI company that works with US defense firms. “Congress and the Trump administration are increasingly using the list as the foundation for China-focused restrictions.”
The latest update to the list in June drew retaliation from the Chinese government, which imposed export controls against 10 US companies, including two rare-earth producers working with the Trump administration.
“China firmly opposes the US overstretching the concept of national security and making discriminatory lists to go after Chinese companies,” the Chinese embassy in Washington said in a statement.
Other companies on the list include drone king SZ DJI Technology, surveillance leader Hangzhou Hikvision Digital Technology, optical transceiver giant Zhongji Innolight and Unitree Robotics – rendered as Hangzhou Yushu Technology on the list.
For Alibaba, the loss of government affairs representation in Washington comes at a particularly delicate moment. Earlier in June, Anthropic accused Alibaba of waging a large-scale effort to “illicitly” access its Claude AI model using thousands of fraudulent accounts in a bid to develop a rival chatbot at a fraction of the cost.
Due to China’s “military-civil fusion” policy – under which Beijing mandates private-sector collaboration with the country’s armed forces – coupled with the loose parameters justifying designations set by Congress, the Pentagon could theoretically legally add almost any Chinese company with a US presence.
At the same time, Congress has also increased the consequences of being added to the list, including the lobbying restrictions and a ban on the Pentagon entering into new contracts with designated entities set to take effect on June 30. Further contracting restrictions are scheduled a year from now.
Designated Chinese businesses are weighing a variety of responses. Companies that had previously sought to privately appeal to the Pentagon are now considering lawsuits against the agency, according to people involved in deliberations, though recent cases have failed in federal court in Washington. Alibaba notably filed its suit in the Northern District of California instead.
Another idea is trying to appeal directly to Trump, according to one of the people. Efforts to lobby the Treasury Department in hopes it would be more influential and open-minded than the Pentagon have so far fallen flat. BLOOMBERG
