A small clothing shop owner in Little Saigon, Orange County, regularly places orders for fabric and accessories through Alibaba.com each quarter to restock her store. She pays no attention to Washington politics, but when Alibaba's name appeared on a Pentagon military list, the question she faced was intensely practical: would the wholesale purchasing platform she relies on continue to operate stably in the United States? This is the lingering concern shared by thousands of Vietnamese-origin businesses that use Alibaba.com or related platforms to import cheap goods from China.
This is a temporary reprieve, not a legal victory.
What is the 1260H list and why it matters now
The 1260H list has existed since 2021, but on June 8, the Pentagon expanded it to 188 companies, adding Alibaba, Baidu, and BYD to the group considered linked to China's military or defense industry, according to the announcement released Monday. Under the new mechanism, the U.S. Department of Defense will be banned from directly contracting with these companies starting February 2027, and prohibited from purchasing their products or services through third parties starting June 2027. Following this news, Baidu stock fell 2.1%, while both Alibaba and BYD each declined 0.8% — a movement small enough to avoid panic, but sufficient to remind Vietnamese-origin investors holding Chinese technology stocks in their retirement portfolios that policy risk has not disappeared.
Legal spiral: from lobbying ban to preliminary injunction
What escalated the situation was a new law that recently took effect, prohibiting the Department of Defense from working with any company that shares a lobbying firm with entities on the 1260H list. Immediately after this law went into effect, more than two dozen lobbying firms withdrew their registration as representatives for Alibaba, and in early July alone, five more lobbying companies also cut ties with the company. Alibaba argued that the company has never collaborated with China's military, and losing lobbying representation left them with no channel to contest policies directly affecting their U.S. business operations.
On June 23, Alibaba officially sued the Pentagon, and by late last week, Federal Judge Eumi K. Lee in Northern California issued a preliminary injunction suspending enforcement of the lobbying ban against Alibaba, allowing the company to temporarily be treated as if not classified as a Chinese military company under that regulation. This order remains in effect until the judge issues a final ruling or 60 days after the hearing, whichever comes first — in other words, this is a temporary reprieve, not a legal victory.
Two-sided reaction and what to watch
Alibaba appeared relieved: a company spokesperson said the firm was satisfied that it would temporarily not be considered a Chinese military company and still had a channel to present its position. But the Pentagon made no concessions on principle — the agency affirmed that the lobbying ban is entirely consistent with the U.S. Constitution, and two China hawks in Congress, John Moolenaar and Elise Stefanik, urged the Defense Secretary to strictly enforce the regulation. From Beijing's perspective, a Chinese Foreign Ministry spokesperson stated that China will take necessary measures to protect the legitimate rights and interests of Chinese enterprises, while criticizing Washington for targeting Chinese companies under the guise of national security — a statement reflecting Beijing's official position rather than an independent assessment.
For the Vietnamese-origin community, what matters is not who wins or loses the lawsuit, but the duration of the uncertainty itself. The 1260H list does not equate to a comprehensive ban like an OFAC list, but it is becoming a new political tool in U.S.-China relations, and derivative restrictions such as the lobbying ban may continue to emerge. Import business owners should closely monitor the February 2027 and June 2027 milestones when the contract bans officially take effect, while investors should treat this as a reminder to reassess the level of policy risk in portfolios holding Chinese technology stocks.