China’s cloud computing firms raise concerns for the US

China's cloud computing firms raise concerns for the US

In the Digital Cold War between the United States and China, US officials are increasingly turning their attention to a new target: the Chinese cloud computing giant.

Over the past 18 months, the Biden administration and members of Congress have discussed what can be done to address security concerns about the cloud computing divisions of Chinese tech giants such as Alibaba and Huawei, said five people with knowledge of the matter.

The three people said US officials have discussed whether they could set tougher rules for Chinese companies when they operate in the United States, as well as ways to counter the companies’ growth overseas. The Biden administration has also talked with US cloud computing companies Google, Microsoft and Amazon to understand how their Chinese competitors operate, said three other people with knowledge of the matter.

By focusing on Chinese cloud companies, US officials are potentially widening the scope of tech tensions between Washington and Beijing. In recent years, the United States has blocked China’s access to critical technologies while trying to limit access to Chinese tech and telecommunications companies overseas.

Former President Donald J. Trump directed his administration to bar Chinese telecom equipment makers such as Huawei and ZTE from playing a role in next-generation 5G wireless networks. The Trump administration also targeted Chinese-owned apps like TikTok and Grindr, forcing the sale of the latter, and began working to restrict Chinese involvement in undersea internet cables. President Biden has continued some of these efforts.

Cloud computing companies, which operate huge data centers that provide computing power and software to businesses, will become a new technological frontier as China pushes back on US barriers. On Monday, Wang Yi, China’s top foreign affairs official, told Secretary of State Antony J. Told Blinken that America should stop interfering in China’s technological development.

But US officials fear Beijing could use Chinese data centers in the United States and abroad to gain access to sensitive data, raising concerns about Chinese telecoms gear and TikTok. Cloud computing is an important behind-the-scenes engine of the digital economy, enabling services such as video streaming and allowing companies to run artificial intelligence programs.

A White House spokesman declined to comment. Huawei did not offer a comment, while Alibaba and Tencent, another Chinese tech giant with cloud divisions, did not respond to requests for comment. Google, Amazon and Microsoft declined to comment.

Sam Sachs, a cyber policy fellow at the New America think tank, said the interest in cloud computing reflects the Biden administration’s approach of looking at Chinese influence in internet infrastructure and digital services that use the web.

“There’s an intention to focus on the entire ecosystem in those layers,” she said.

US efforts to hinder Chinese tech firms have met with mixed success. US sanctions on Huawei’s suppliers hurt the company’s smartphone business, but efforts to remove Huawei equipment from wireless networks inside the United States continue. The Trump administration forced Grindr’s Chinese owners to sell the app, while efforts to divest TikTok to Chinese internet giant ByteDance were unsuccessful.

According to Synergy Research Group, the global cloud computing market is substantial, with total public cloud revenue of $544 billion last year. In the United States, Chinese companies account for a small portion of the cloud market, despite having data centers in Silicon Valley and Virginia, said John Dinsdale, principal analyst at Synergy.

But Chinese cloud companies are making inroads in Asia and Latin America. Huawei’s chairman said last year that his company had seen “exponential growth” in its cloud business. In May, Huawei hosted a cloud conference in Indonesia. Alibaba held a gathering in Mexico last year to promote its cloud products.

Senator Mark Warner, a Democrat from Virginia, said in a statement that he was concerned that the Federal Communications Commission might bar some Chinese companies from providing telecommunications services in the United States, even though those companies “should be able to offer services such as cloud computing”. Was.” Mr. Warner wrote legislation that would give the White House more power to control Chinese technology.

In April, nine Republican senators wrote to a group of administration officials encouraging them to investigate and punish Chinese cloud companies that they said pose a threat to national security, including Huawei, Alibaba, Tencent and Baidu.

“We urge you to use all available means to engage in decisive action against these firms,” ​​he said.

The Commerce and State Departments are considering how to handle Chinese cloud computing companies, said four people with knowledge of the matter.

The Commerce Department is looking to enact stricter rules that would govern Chinese cloud providers, two of the people said. It could make rules under a new legal authority allowing it to restrict technologies that could pose a threat to national security.

A spokeswoman for the Commerce Department declined to comment.

The State Department has also begun developing a strategy to raise US concerns about Chinese cloud computing providers with other countries, said two people with knowledge of the matter. One of the people said the agency has already quietly raised the topic in talks with foreign governments, which could help diplomats understand what messages work best.

Since many Chinese companies benefit from large government subsidies, experts fear that Chinese cloud computing providers may be able to offer contracts below the rates of their American competitors. To counter the temptations of Chinese companies, the US government may find a way to offer its own foreign aid or urge US cloud providers to provide benefits to customers.

A State Department spokeswoman said it was important for every aspect of the global Internet — including data centers — to be powered by trusted equipment. The spokesman said the agency is also focusing on mitigating risks associated with wireless equipment, undersea telecommunications cables and satellites.

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