In the digital cold war between the US and China, US officials are increasingly turning their attention to a new target: Chinese cloud computing giants.
Over the past 18 months, the Biden administration and members of Congress have stepped up their exploration of what can be done to address security concerns surrounding the cloud computing divisions of Chinese tech behemoths such as Alibaba and Huawei, five people with knowledge of the matter said .
U.S. officials have discussed whether to impose tighter rules on Chinese companies operating in the United States, as well as ways to counter the companies’ growth abroad, three of the people said. The Biden administration has also spoken with U.S. cloud computing companies Google, Microsoft and Amazon to understand how their Chinese competitors operate, three other people with knowledge of the matter said.
By focusing on the Chinese cloud companies, US officials are potentially widening the scope of technology tensions between Washington and Beijing. In recent years, the United States has strangled China’s access to crucial technologies while trying to limit the reach of Chinese technology and telecommunications companies abroad.
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 limit Chinese involvement in undersea internet cables. President Biden has continued some of these efforts.
Cloud computing companies, which run huge data centers that provide computing power and software to businesses, would become a new technological front, just as China has pushed back on US roadblocks. On Monday, Wang Yi, China’s top foreign affairs official, told Secretary of State Antony J. Blinken that the United States needed to stop interfering in China’s technological development.
But US officials fear Beijing could use Chinese data centers in the US and abroad to access sensitive data, echoing concerns about Chinese telecommunications equipment and TikTok. Cloud computing is a crucial behind-the-scenes engine of the digital economy, enabling services like video streaming and allowing businesses 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 a cloud division, did not respond to requests for comment. Google, Amazon and Microsoft declined to comment.
Samm Sacks, a cyber policy fellow at the New America think tank, said the interest in cloud computing reflected the Biden administration’s approach to looking at Chinese influence in the infrastructure of the Internet and the digital services that use the Web.
“There is an intention to focus on the whole ecosystem across these layers,” she said.
US efforts to hinder Chinese technology companies have met with mixed success. US restrictions on suppliers to Huawei are hurting the company’s smartphone business, but efforts to remove Huawei equipment from wireless networks inside the US continue. The Trump administration forced Grindr’s Chinese owners to sell the app, while efforts to pressure Chinese internet giant ByteDance to divest TikTok have been unsuccessful.
The global cloud computing market is sizeable, with total public cloud revenues of $544 billion last year, according to Synergy Research Group. In the United States, Chinese companies account for a small fraction 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 “rapid growth” in its cloud business. In May, Huawei hosted a cloud conference in Indonesia. Alibaba called a gathering in Mexico last year to promote its cloud products.
Senator Mark Warner, Democrat of Virginia, said in a statement that he was concerned that even if the Federal Communications Commission could prevent some Chinese companies from providing telecommunications services in the United States, those companies had “still been able to offer services like cloud computing.” Mr. Warner wrote legislation that would give the White House more power to monitor Chinese technology.
In April, nine Republican senators wrote to a group of administration officials urging them to investigate and punish Chinese cloud companies they said posed a threat to national security, including Huawei, Alibaba, Tencent and Baidu.
“We urge you to use all available tools to engage in decisive action against these firms,” they said.
The Commerce and State Departments have been considering how to deal with the Chinese cloud computing companies, four people with knowledge of the matter said.
The Commerce Department has been looking at creating tighter rules that would govern the Chinese cloud providers, two of the people said. It could create the rules under a new legislative authority that allows it to restrict technologies that could pose a threat to national security.
A spokesman for the Department of Commerce declined to comment.
The State Department has also begun developing a strategy to raise U.S. concerns about Chinese cloud computing providers with other countries, two people with knowledge of the matter said. The agency has already quietly brought up the topic in talks with foreign governments, which can help diplomats understand what messages work best, one of the people said.
With many Chinese companies benefiting from large government subsidies, experts fear that the Chinese cloud computing providers may be able to offer contracts below the prices of their American competitors. The U.S. government could find a way to offer its own foreign aid or encourage U.S. cloud providers to give customers benefits, such as free training, to counter the inducements of Chinese companies.
A State Department spokesman said it was essential for all aspects of the global internet – including data centers – to be powered by reliable equipment. The spokesman added that the agency was also focused on reducing risks associated with wireless equipment, undersea telecommunications cables and satellites.
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