In the digital cold war between the United States 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 investigations into what can be done to address the security concerns related to the cloud computing divisions of Chinese tech giants such as Alibaba and Huawei, five people with knowledge.
U.S. officials have discussed whether they can impose stricter regulations on the Chinese companies when they operate in the United States, as well as ways to curb the growth of the companies abroad, three of the people said. The Biden administration has also spoken with US cloud computing companies Google, Microsoft and Amazon to understand how their Chinese competitors operate, three other people with expertise said.
By focusing on the Chinese cloud companies, US officials may be widening the scope of the technology tensions between Washington and Beijing. In recent years, the United States has stifled China’s access to critical technologies while trying to limit the reach of Chinese technology and telecommunications companies abroad.
Former President Donald J. Trump directed his administration to prevent Chinese telecom equipment manufacturers, such as Huawei and ZTE, from playing a role in next-generation 5G wireless networks. The Trump administration also targeted China-owned apps like TikTok and Grindr, forcing the latter to be sold, and began working to limit Chinese involvement in submarine internet cables. President Biden has continued some of these efforts.
Cloud computing companies, operating massive data centers that provide computing power and software to businesses, would become a new technology front just as China has pushed back roadblocks in the US. On Monday, Wang Yi, China’s top foreign affairs official, told Secretary of State Antony J. Blinken that the United States 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 access sensitive data, echoing concerns about Chinese telecom equipment and TikTok. Cloud computing is a critical behind-the-scenes engine of the digital economy, enabling services such as video streaming and enabling companies to run artificial intelligence programs.
A White House spokesperson declined to comment. Huawei has not commented, while Alibaba and Tencent, another Chinese tech giant with a cloud division, have not responded to requests for comment. Google, Amazon and Microsoft declined to comment.
Samm Sacks, a cyber policy officer 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 Internet’s infrastructure and the digital services that use the Internet.
“The idea is to focus on the whole ecosystem in those layers,” she said.
US efforts to hinder Chinese tech companies have met with mixed success. US restrictions on Huawei’s suppliers hurt the company’s smartphone business, but efforts to remove Huawei equipment from wireless networks in the United States continue. The Trump administration forced Grindr’s Chinese owners to sell the app, while efforts to get Chinese internet giant ByteDance to divest TikTok were unsuccessful.
According to Synergy Research Group, the global cloud computing market is significant, with total public cloud revenues of $544 billion last year. In the United States, Chinese companies account for a small share of the cloud market, despite having data centers in Silicon Valley and Virginia, said John Dinsdale, chief analyst at Synergy.
But Chinese cloud companies are penetrating into 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 held a meeting in Mexico last year to promote its cloud products.
Senator Mark Warner, Democrat of Virginia, said in a statement that he was concerned that while the Federal Communications Commission could ban some Chinese companies from offering telecom services in the United States, those companies “would still have been able to provide services such as cloud to provide computing. 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 government officials encouraging them to investigate and sanction Chinese cloud companies they believe pose a threat to national security, including Huawei, Alibaba, Tencent and Baidu.
“We urge you to use all available resources to take decisive action against these companies,” they said.
The Commerce and Foreign Affairs ministries have been thinking about how to deal with China’s cloud computing companies, four experts said.
The Commerce Department has been looking at setting stricter rules for China’s cloud providers, two of the people said. It could create the rules under a new legal authority that would allow it to restrict technologies that could pose a threat to national security.
A spokesman 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, two experts said. The agency has already quietly brought up the topic in conversations with foreign governments, which can help diplomats understand which messages work best, one of the people said.
As many Chinese companies benefit from large government subsidies, experts fear that China’s cloud computing providers may offer contracts below the rates of their US competitors. The US government could find a way to offer foreign aid itself or push US cloud providers to offer customers benefits, such as free training, to counter the Chinese companies’ enticements.
A State Department spokesperson said it is critical that every aspect of the global internet – including data centers – is powered by reliable equipment. The spokesperson added that the agency was also focused on mitigating risks associated with wireless equipment, submarine telecom cables and satellites.
