Chinese tech giant Alibaba has filed a federal lawsuit against the Defense Department for designating it a military-linked firm.

The company told AFP on Wednesday that the labelling is "arbitrary and capricious."

The lawsuit, filed Tuesday in federal court in San Jose, Calif., contests the Pentagon's decision include Alibaba on a list released this month of companies it says have ties to the Chinese military.

"The determinations have no basis in fact or law," the complaint said.

BYD and Baidu said earlier that there was no basis for including them on the list, and the Chinese Embassy asserted that the U.S. was "overstretching the concept of national security and making discriminatory lists to go after Chinese companies."

"Alibaba is not a Chinese military company nor part of any military-civil fusion strategy," a company spokesperson told AFP. "The decision to place Alibaba on the ... list is arbitrary and capricious, and we are filing a lawsuit against the Department of War to demand removal from the list," the spokesperson said.

The Pentagon had 80 companies and their subsidiaries on the list, which also includes tech giant Baidu, electric vehicle firm BYD and search engine Baidu.

Under the designation, beginning June 30, the Pentagon can't enter into new contracts with designated companies or their controlled subsidiaries.

The designation also restricts the companys' ability to retain lobbying firms in the U.S., which the lawsuit argues violates First Amendment rights.

"The effect is already being felt: Advocates who have represented Alibaba for years have informed the company that they can no longer do so," the complaint stated.

Alibaba said in its suit that it's a publicly traded e-commerce and cloud-services provider with a diverse shareholder base dominated by major American financial institutions including J.P.Morgan, Citigroup, and BlackRock.

China retaliated against the blacklist on Monday, imposing export controls on ten U.S. companies involved in defense and rare earths mining.

The feud tests bilateral relations after President Trump and Chinese counterpart Xi Jinping met in Beijing last month to stabilize ties.