Commerce Department Targets Chinese Firms Engaged in Military-Civil Fusion

The United States wants to break up Beijing’s snug relationship between its parading tanks and Chinese tech firms. On September 16, the Commerce Department updated its Entity List, imposing stringent export controls on what can be sold to designated individuals and firms, including a broad range of Chinese technology companies allegedly cooperating with the People’s Liberation Army (PLA).

That cooperation is part of a broader Chinese attempt at military-civil fusion — an effort to incorporate civilian technology firms into the country’s military-industrial base — to achieve its modernization goals. The designations are intended to effectively undermine the burgeoning connections between Chinese technology firms and the PLA by weakening their access to the American market.

Entity List Update Includes State-Linked Labs, Semiconductor Fabs, and Biotech Firms

The firms listed in the update include those directly tied to Beijing’s science and technology development pipeline. Among those named is the National Time Service Center under the Chinese Academy of Sciences (CAS). The Center is partially responsible for building out China’s growing constellation of military communications satellites and contributing to the PLA’s quantum computing projects. Another CAS program, the Aerospace Information Research Institute, oversees the PLA’s high-altitude balloon research — including the type of surveillance balloon that drifted over the United States and Canada in 2023.

The update also includes a number of Chinese semiconductor foundries and biotech firms accused of working with the PLA to further its research into artificial intelligence (AI) and military-related biodefense. These include the Shanghai Fudan Microelectronics Company, which allegedly sent microelectronics to Russian defense contractors while developing high-performance AI chips for the Chinese military, and several Beijing- and Shanghai-based biotech firms accused by Commerce of collaborating with the PLA Academy of Military Medical Sciences.

China Continues To Pursue Military-Civil Fusion

China has accelerated its investment in military-civil fusion despite ongoing economic turmoil. Along with increasing financial support for the country’s network of defense-related universities, Beijing has also prioritized funding for military research projects, promising more support from local governments for constructing joint civilian-military infrastructure and setting aside additional land for training.

Much of this research has focused on emerging technologies seen by the PLA as changing the nature of warfare — particularly artificial intelligence and biotechnology. Having adopted a new operational concept of “intelligentized warfare” to improve its precision targeting and force deployment capabilities, the PLA has placed growing emphasis on integrating AI into its main weapons systems, command and control infrastructure, and logistical support systems. Beijing has also increasingly invested in China’s biotech sector, which remains deeply embedded within the PLA, often sharing research facilities and funding sources.

Washington Should Strengthen Investment Restrictions While Promoting American Innovation

The Commerce Department’s additions to the export control list will stymie China’s continued efforts to blur the lines between civilian commerce and military competition to achieve its ambitious military modernization program. Going forward, the United States should expand its efforts to undermine military-civil fusion, particularly in screening outbound American investment in the Chinese technology sector and maintaining strong export controls on semiconductor manufacturing technology.  

Washington should pair these efforts with stronger investments into the foundations of American innovation. Working with the Trump administration, Congress should ensure that the National Science Foundation and National Institutes of Health are consistently well-funded to support critical research across a broad range of strategic fields. These efforts should be paired with Congressional action to support small- and medium-sized firms in scaling to become more globally competitive against their emerging Chinese competitors.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.