Effective last week, the Department of War is now prohibited from awarding contracts to companies, including their parent companies and subsidiaries, that retain consultants, law firms, or public relations that also lobby for certain entities with ties to the Chinese military. Under Section 851 of the fiscal year 2025 (FY25) defense authorization bill, the Pentagon is barred from entering into contracts with companies that retain so-called “covered lobbyists,” who may engage in lobbyist activities on behalf of companies that have been designated by the department as being linked to the Chinese military.
The Section 1260H CMC list is an annually updated roster of “Chinese military companies” that operate directly in the United States. It has been maintained since the passage of the fiscal year 2021 (FY21) National Defense Authorization Act (NDAA).
With this new rule, firms will need to choose between representing Chinese clients and maintaining their potentially lucrative relationships with U.S. defense contractors.
Lawmaker Urging
Last month, in a letter to Secretary of War Pete Hegseth, Congressional lawmakers Rep. John Moolenaar (R-Mich.), chairman of the House Select Committee on China, and Rep. Elise Stefanik, chairwoman of the House Republican Leadership, called for the Pentagon to implement the ban and ensure that it will apply to both current as well as prospective contractors, and encourage contractors to note that the law applies to contracts with any firm engaging in lobbying activities defined under the Lobbying Disclosure Act. That applies even if the firm is not required to register as a lobbyist.
In addition, the lawmakers urged the department to ban in alignment with the “intent to capture U.S.-based subsidiaries of companies on the 1260H List. Chinese companies designated on the 1260H List often operate in the United States through wholly owned subsidiaries and affiliates. Lobbyists representing such clients are inherently advancing the interests of their parent companies designated on the 1260H List.”
What Qualifies as a Chinese Company?
According to the 1260H CMC list, a Chinese company would be included in an entity that is directly or indirectly owned, controlled by, or acts on behalf of or at the behest of the Chinese military or a related authority (e.g., the Chinese Central Military Commission). In addition, such entities could include those that contribute to the People’s Republic of China’s (PRC’s) military-civil fusion, the broad set of connections within China’s defense-industrial complex.
It would also include those companies that engage in commercial services, manufacturing production, or export in the United States and its territories.
The June 2026 update significantly expanded the roster to more than 180 entries, and newly designated parent-level companies included technology and artificial intelligence firms Alibaba Group, Baidu, BOE Technology, TP-Link, and Zhangji Innolight; automotive and battery companies BYD, NIO, CALB, and EVE Energy; drone and robotics makers Autel Intelligent Technology and Hangzhou Yushu Technology (Unitree); and several biotechnology entities including WuXi AppTec, Complete Genomics, and Novogene, among others.
The Pentagon has described the continued updating of this list as an important effort in countering the PRC Military-Civil Fusion strategy, which seeks to eliminate barriers between China’s civilian research and commercial tech sectors and its military. The primary goal of this ongoing strategy is to allow the People’s Liberation Army (PLA) to develop a technologically dominant, “world-class military” by 2049, the U.S. Department of State has warned.
Beijing has repeatedly opposed the concept, and Alibaba has already filed a lawsuit against the Pentagon for being designated a Chinese military-linked entity.
Still, several Washington, D.C., lobby firms have cut ties with the Chinese tech giant, which was founded in 1999 and today operates as a network of digital marketplaces while also being heavily involved in cloud computing, fintech, and digital media.
“The 1260H restriction reflects a larger shift in how the Pentagon is beginning to understand Chinese military-civil fusion,” explained geopolitical analyst Irina Tsukerman, president of threat assessment firm Scarab Rising.
Tsukerman told ClearanceJobs that for years, Washington treated the problem mainly as a matter of tainted equipment, vulnerable software, compromised telecom systems, rare earth dependencies, semiconductors, drones, batteries, cloud infrastructure, and other visible pieces of the defense supply chain. However, the issue has gone far deeper.
“The lobbying and consulting world received far less attention, even though influence work can shape procurement debates, congressional attitudes, regulatory pressure, public messaging, and the broader climate in which national security decisions are made,” Tsukerman warned.
