The US Department of Defense has added a slew of companies to Washington’s official list of Chinese military suppliers operating within the USA.
A notice published in the Federal Register on 7 January reveals that the Pentagon has formally designated 134 manufacturing and technology firms as “Chinese military companies”.
The list features numerous subsidiaries of the state-owned Aviation Industry Corporation of China (AVIC) that provide aircraft components and avionics, alongside airframers Shenyang, Changhe, Xian and Hongdu, which actively produce fighters, bombers, rotorcraft and trainers for the Chinese military.
Notably, the expansive roll also includes a number of entities outside the traditional defence sphere, including civil airframer Comac, the Shanghai Aircraft Manufacturing assembly centre, the Guizhou Aviation Technical Development company, telecommunications giant Huawei and numerous producers of semiconductor chips.
The action was taken in accordance with a 2021 law passed by US Congress requiring the secretary of defense to publicly identify any Chinese defence suppliers “operating directly or indirectly in the United States”.
Inclusion on the so-called “Section 1260H list” sets the stage for subsequent regulatory actions, including the imposition of special export license requirements and a ban from accessing US financial markets.
Those penalties were established by three presidential executive orders; two issued by Donald Trump at the end of his first term in 2020 and 2021, and a third drafted by Joe Biden at the start of his tenure in 2021. The sanctions are meant to restrict the Chinese firms’ access to investment capital and critical technologies developed by American companies.
Practically speaking, the latest designation does not mean much for traditional Chinese defence suppliers such as Chengdu, Shenyang, Guizhou, Xian, Harbin General Aircraft, and Shaanxi, which are already listed on US commerce department’s Military End User (MEU) list.
That roster identifies foreign parties required to obtain a special license for the purchase of certain American-made technologies with defence applications, including avionics, lasers, sensors, general purpose electronics and manufacturing materials.
“These parties have been determined by the US government to… represent an unacceptable risk of use in or diversion to a ‘military end use’ or ‘military end user’ in China, Russia, or Venezuela,” the US Bureau of Industry and Security says.
Identified firms are also barred from listing on US securities markets, while US citizens, residents and corporations are prohibited from making or holding investments in MEU companies, under the executive action by Trump.
Beijing has repeatedly sanctioned major US defence manufacturers, including RTX subsidiary Raytheon, Boeing and Lockheed Martin. Munitions producers Lockheed and Raytheon in 2023 were slapped with a general ban on doing business within China, in connection to arms sales to Taiwan.
Companies with commercial aviation interests in China avoided the blanket ban, including Boeing and RTX subsidiaries Collins Aerospace and Pratt & Whitney.
Comac was among eight Chinese aerospace firms separately blacklisted by Washington in 2021 by the Trump Administration with the designation “communist Chinese military companies”. That label barred Comac from accessing US financial markets and forced US investors to divest their holdings in the company.
However, the airframer at the time avoided the more severe designation of a Military End User. The company’s inclusion on the latest roll of Chinese military companies operating within the USA could very well serve as a justification for additional sanctions by the second Trump Administration, which assumes power on 20 January.
The potential headwinds come at a critical time for Comac, which is seeking to expand the presence of its flagship C919 twinjet.
The narrowbody type launched its first commercial service outside mainland China earlier this month, after first entering service in May 2023 with China Eastern Airlines.
Comac’s backlog includes triple-digit orders for the C919 from each of China’s ‘big three’ carriers – Air China, China Eastern and China Southern – with the type poised to begin “large-scale operation”, the company says.
The airframer is reportedly targeting an annual production rate of 150 aircraft within five years, although observers have called that figure ambitious, owing to the ongoing supply chain constraints plaguing the aerospace sector.
