
Credit: Official White House Photo by Shealah Craighead
American-based affiliates of Chinese companies, including at least one firm with ties to the Chinese military, received millions of dollars in loans from a federal program aimed at keeping small businesses afloat during the global pandemic, according to data released this week.
Records reviewed by The Wire show that between $5 million and $10 million in federally backed funds were tapped by Continental Aerospace Technologies, a Mobile, Ala., firm that is a subsidiary of the Aviation Industry Corporation of China, one of the country’s largest defense contractors. Two weeks ago, AVIC was named on a list the Pentagon compiled of companies affiliated with China’s People’s Liberation Army, or the PLA.
In April, a loan of as much as $2 million went to an affiliate of CloudMinds Technology, a Santa Clara, Calif.-based artificial intelligence and robotics firm that is backed by Japan’s Softbank, the venture capital firm, as well as two Chinese government funds managed by Tsinghua University and Zhongguancun Development Group, according to Pitchbook, which tracks venture capital investments.
In May, after the company received the bailout funds, the U.S. Department of Commerce added three affiliates of CloudMinds — in Beijing, Hong Kong, and the United Kingdom — to the U.S. Entity List, which only applies to foreign companies. Companies on the list are usually considered a national security risk and American firms are barred from exporting goods or services to them. (In a statement posted on its website, CloudMinds says the firm only makes products for civilian use.)
The findings, first reported this week by Bloomberg News and Reuters, show that affiliates of overseas companies were among those that benefited from the Paycheck Protection Program, often called the P.P.P. The program is a federally backed fund for small businesses to pay their employees and help cover the costs of rent and utilities at a time when the economy was cratering. Many of the loans are expected to be forgiven, particularly if the companies retain most of their employees.

Credit: Mztourist, Creative Commons
Why were Chinese firms able to get bailout funds? Analysts say it probably wasn’t a violation of the initial guidelines laid out by the federal government’s Small Business Administration, and that nothing prevents foreign-backed firms in the U.S. — or even affiliates of overseas military outfits — from applying for the same type of loan that went to restaurants, barber shops, and American mom-and-pop stores.
“The policy behind this program has nothing to do with the companies themselves, really,” said Scott Pearson, a partner at Manatt, Phelps & Phillips who specializes in financial services and government litigation. “One would think that the policy objectives are being achieved if we’re saving the jobs of U.S. workers, regardless of whether they have foreign affiliates or not.”
According to the U.S. government, 4.9 million loans worth about $660 billion have been made under the Paycheck Protection Program in recent months, mostly to small businesses that each accepted, on average, about $100,000. Since the release of more detailed reports, though, news outlets have uncovered loans that the program made to large restaurant chains like P.F. Chang’s, car dealerships owned by congressmen, and even high-priced law firms.
The Wire searched government filings for well-known Chinese firms operating in the U.S. and found nine affiliates of Chinese firms that received as much as $34 million in bailout funds in all, including grants to two affiliates of the HNA Group, the huge Chinese airlines to hotels conglomerate that has been hurtling toward bankruptcy. The company, which some years back went on a $50 billion global buying spree, has been seized by the Chinese state after falling deeply into debt with the country’s state-run banks.
American taxpayer money also supported a U.S. affiliate of iSoftStone, a Chinese information technology company that has ties to Huawei, as well as a Fremont, Calif. affiliate of Enablence, a Canadian firm partly owned by Chinese telecom giant ZTE. Huawei and ZTE each appeared on a list recently released by the Pentagon of companies allegedly linked to the Chinese military. (The Pentagon list was released without any accompanying policy shift, which generated a sense of anticipation for legislative or executive action that might limit companies’ presence in the United States.)
Many, if not all, of the U.S. affiliates of Chinese firms listed as receiving funds this year would be unable to receive these loans now, analysts say, following an update of the government guidelines in early May. The Small Business Association clarified that loan applicants should total up all employees, domestic and overseas, when asked how many employees they have — and that total should be less than 500. A spokesman for the Small Business Administration could not be reached for comment.
In recent months, the Trump administration has taken a vocal stance against doing business with companies it sees as supporting China’s military and expanding global influence, targeting their U.S. operations and supply chains that rely on American components.
Although there is little concern that giving a few million dollars to massive Chinese conglomerates will boost their businesses in a way that could harm U.S. interests, analysts say it shows a lack of coordination among government agencies that could have a more serious impact in the future. Since the outbreak of Covid-19, lawmakers from both parties have announced plans to reduce America’s reliance on China and examine the role of Chinese companies in the economy, a highly complex task.
“This was test number one,” said Derek Scissors, a resident scholar at the American Enterprise Institute, a conservative think tank in Washington. “We flunked.”

Eli Binder is a New York-based staff writer for The Wire. He previously worked at The Wall Street Journal, in Hong Kong and Singapore, as an Overseas Press Club Foundation fellow. @ebinder21

Hannah Reale is an intern with The Wire. Previously, she reported for the New England Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale

Sam Sharpe is an intern at The Wire. He is based in New York, where he studies at the Craig Newmark Graduate School of Journalism at CUNY. @SharpeReports