China Hits MP Materials, Drone Makers With Export Curbs After Pentagon List

China retaliated against the Pentagon's expanded blacklist of Chinese technology companies by restricting trade with 10 U.S. firms, including rare earth miner MP Materials and drone makers Teal Drones and Jaia Robotics.

The Chinese Ministry of Commerce said Monday it would bar exports of any dual-use items originating in China to those companies. A separate statement from the Chinese Finance Ministry excluded 46 U.S. entities, mostly defense contractors, from government procurement projects. Foreign-funded subsidiaries in China linked to the excluded firms are also exempted.

The moves follow the Pentagon's update earlier this month to its 1260H list, which added Alibaba Group, Baidu and BYD to a roster of companies it believes aid Beijing's military. The designation does not impose immediate sanctions. It bars the Defense Department from awarding direct contracts to affected companies starting June 30, with indirect procurement restrictions following in 2027. The listing tends to deter other federal agencies and commercial partners from doing business with named firms.

Beijing's countermeasures appear largely symbolic, said Han Shen Lin, China country director at consultancy The Asia Group. Most targeted U.S. companies have "little or no meaningful business exposure in China," he said.

The latest restrictions provide a "model example" of how China will likely handle mild escalation from the U.S. while keeping the broader relationship stable, said Dan Wang, China director at Eurasia Group. He noted that last month's Trump-Xi summit reset relations on a more positive footing.

Several Chinese firms have disputed their 1260H designations and pledged legal action. Xiaomi won a court challenge that removed its designation in May 2021.

For MP Materials, the export controls add a layer of operational risk to a company already navigating the complexities of rare earth processing outside China. The company's Mountain Pass mine in California is the largest rare earth facility in the Western Hemisphere. It still relies on Chinese supply chains for certain downstream processing steps. The stock fell 3.2% in Monday trading.

Alibaba Group, with an Alpha Score of 44/100, carries a Mixed label in AlphaScala's proprietary scoring system. The e-commerce and cloud giant's inclusion on the Pentagon list adds reputational friction for institutional investors who track defense-related restrictions. The direct financial impact is minimal given Alibaba's limited U.S. government contracting exposure.