The sanctions are related to China's purchase of 10 SU-35 combat aircraft in 2017 and S-400 surface-to-air missile system-related equipment in 2018, in breach of a sweeping US sanctions law punishing Moscow for meddling in the 2016 US election, something Russia denies.
The US blacklisted another 33 people and entities associated with the Russian military and intelligence, adding them to a list under the 2017 law, known as the Countering America's Adversaries Through Sanctions Act, or CAATSA.
CAATSA also seeks to punish Russia for its aggression in Ukraine and involvement in Syria's civil war.
What impact will the sanctions have?
The sanctions will deny EDD any foreign export licences, prohibit it from making foreign exchange transactions within US jurisdiction or using the US financial system, and block its property and interests within US control, the Hong Kong-based South China Morning Post reported.
Sanctions on Li will also prohibit his using the US financial system and making foreign exchanges, and block any of his property or interests. He will also be prohibited from having a US visa.
It also adds them to the Treasury Department's list of specially designated individuals with whom Americans are barred from doing business.
Founded in 2016 by Chinese President Xi Jinping, the EDD was tasked with overseeing and improving the country's military technology. It is regarded as a key part of China's Central Military Commission (CMC), the overall high command of the Chinese military headed by Xi.
How China has reacted
An "outraged" China on Friday lodged a diplomatic protest with the US for imposing the punitive sanctions, warning of "consequences" if the sanctions are not revoked.
"China expresses strong indignation at these unreasonable actions by the US side and has already lodged stern representations," Chinese Foreign Ministry spokesman Geng Shuang told reporters in Beijing, adding the moved seriously harmed bilateral relations and military ties.
"We strongly urge the US side to immediately correct the mistake and rescind the so-called sanctions, otherwise the US side will necessarily bear responsibility for the consequences," he said, without giving details.
China has "normal" military exchanges and cooperation with Russia, aimed at protecting regional peace and stability, which is not against international law or aimed at any third party, Geng added.
Asked whether China would continue its close intelligence and defence cooperation with Russia, Geng said, "China and Russia are comprehensive strategic partners of coordination. We have been having normal exchanges of cooperation on the basis of equality, mutual trust and mutual benefit in various fields including national
"We will work with Russia to implement the consensus reached by two leaders and move forward our strategic coordination," he said referring to the close ties between Chinese President Xi Jinping and his Russian counterpart Vladimir Putin.
China will continue to work with Russia to promote strategic cooperation at an even higher level, he said.
The sanctions are expected to heighten tensions between the US and China, which are currently engaged in a trade war.
The two countries will launch new tariffs on Monday, with Washington targeting $200 billion in Chinese exports and Beijing hitting $60 billion worth of American products.
How Russia has reacted
Russia on Friday called the new wave of US sanctions misguided, saying Washington's habit of using sanctions against Moscow risked undermining global stability and was part of a dangerous game.
Russian Deputy Foreign Minister Sergei Ryabkov said in a statement it seemed to Moscow that imposing sanctions on Russia had become a national
US pastime, noting that the latest wave of restrictions was the 60th sanctions package since 2011.
"Each new round of sanctions proves our foe's complete lack of success in pressuring Russia with previous such attempts," said Ryabkov, who added that Washington would never succeed in dictating its conditions to Moscow. "It would be not bad if they remembered about the concept of global stability which they are unthinkingly undermining by whipping up tensions in Russia-US relations. Playing with fire is stupid and can become dangerous."
In Moscow, Russian member of parliament Franz Klintsevich said the sanctions would not affect the S-400 and SU-35 deals.
"I am sure that these contracts will be executed in line with the schedule," Klintsevich was quoted as saying by Russia's Interfax news agency. "The possession of this military equipment is very important for China."
How are the sanctions linked to alleged Russian interference in 2016 US elections?
Doing significant business with anyone on the US blacklist can trigger sanctions like those imposed on China. Some of those added to the list, which now contains 72 names, were indicted in connection with Russian interference in the 2016 US election, a US official said.
President Donald Trump on Thursday issued an executive order intended to facilitate implementation of the sanctions.
A federal special counsel is leading a criminal investigation of Russian interference in the US election, and any possible cooperation with Trump's presidential campaign.
Trump has insisted there was no collusion with Russia.
Moscow denies any effort to meddle in US politics.
Aimed at Moscow or Beijing?
One US administration official, who briefed reporters on condition of anonymity, said the sanctions imposed on the Chinese agency were aimed at Moscow, not Beijing or its military, despite an escalating trade war between the United States and China.
"The ultimate target of these sanctions is Russia. CAATSA sanctions in this context are not intended to undermine the defence capabilities of any particular country," the official told reporters on a conference call.
"They are instead aimed at imposing costs upon Russia in response to its malign activities," the official said.
What do the experts say?
Security analysts in Asia said the move was largely symbolic and would only push Moscow and Beijing closer together.
"The imposition of US sanctions will have zero impact on Russian arms sales to China," said Ian Storey, of Singapore's ISEAS Yusof Ishak Institute.
"Both countries are opposed to what they see as US bullying and these kind of actions will just push Beijing and Moscow even closer together," he said, adding that Moscow needed Chinese money and Beijing wanted advanced military technology.
Collin Koh, a security analyst at Singapore's S Rajaratnam School of International Studies, said the sanctions would do little to counter the evolving research and development relationship between China and Russia.
China relies less on large big-ticket purchases from Russia, but Chinese defence industries are seeking expertise from Russia and former-Soviet states to plug knowledge gaps, he said.
Why has the US done this?
The Trump administration is pursuing strategies to clamp down on China and faces growing pressure to respond strongly to US intelligence agency reports that Russia is continuing to meddle in US politics.
Members of Congress, including many of Trump's fellow Republicans, who passed the sanctions bill nearly unanimously, have repeatedly called on the administration to take a harder line against Moscow.
Administration officials said they hoped the action against EDD would send a message to others considering buying the S-400.
US officials have been discussing the issue particularly with NATO ally Turkey, which wants to buy the Russian-made S-400 surface-to-air missile batteries.
Washington has expressed concern that Turkey's planned deployment of the S-400s could pose a risk to the security of some US-made weapons and other technology used by Turkey, including the F-35 fighter jet.
US officials have warned that Turkey's purchase of the system could contravene CAATSA.
"We hope that at least this step will send a signal of our seriousness and perhaps encourage others to think twice about their own engagement with the Russian defence and intelligence sectors," another US official said.
It is the first time the Trump administration targeted a third country with CAATSA.
What does this mean for India?
The purchase of major military equipment like the multi-billion-dollar S-400 Triumf from Russia would be considered as a "significant transaction" and has a potential for imposing tough US sanctions, the Trump administration said Friday, as India mulls buying the air defence systems.
In the recent 2+2 Dialogue held in New Delhi, US Defence Secretary James Mattis had said, "The sanctions aren't intended to adversely impact countries like India. They are intended to have an impact the sanctioned country, which is Russia. And so we'll work our way through the waiver decision as the days and weeks proceed, and we'll do that alongside our partner, India, as well."