Alibaba filed a lawsuit in California federal court seeking removal from the Pentagon's list of Chinese military companies, arguing the department provided insufficient evidence for its designation. The e-commerce giant claims its inclusion on the congressionally mandated blacklist is "arbitrary and capricious" and contradicted by substantial contrary evidence it previously submitted.

The lawsuit follows the Pentagon's addition of Alibaba and BYD to the so-called 1260 H list, which identifies companies allegedly tied to the People's Liberation Army. Alibaba specifically denied participating in China's military-civil fusion strategy. Wu Xi App Tec filed a similar petition in another district court, stating confidence that its designation lacks factual or legal support.

While the blacklist carries no immediate legal penalties, it creates significant business risks. State governments may use federal designations to justify divestment regimes, and Congress has pushed for delisting of Chinese companies from US exchanges. The designation also threatens Alibaba's NYSE-listed securities with potential state-level restrictions.

New restrictions take effect next week under the National Defense Authorization Act, which bars the Pentagon from business relations with groups lobbying for companies on the list. Alibaba retained Sidley Austin to handle its case, marking an escalation in US-China corporate tensions after Beijing's retaliatory commerce restrictions on US firms.