China’s cloud computing firms raise concern for US

WASHINGTON – In the digital cold war between the United States and China, American 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 ramped up their exploration of what can be done to address security concerns about the cloud computing divisions of Chinese tech behemoths like Alibaba and Huawei, five people with knowledge of the matter said.

Officials have discussed whether they can set tighter rules for the Chinese companies when they operate in the US, as well as ways to counter the companies’ growth 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 knowledge of the matter said.

By focusing on the Chinese cloud companies, US officials are potentially widening the scope of the technological tensions between Washington and Beijing.

In recent years, the US has choked off China’s access to crucial technologies while trying to limit the reach of Chinese tech and telecommunication companies abroad.

Former president Donald Trump directed his administration towards hindering Chinese telecommunications equipment makers like 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 Joe Biden has continued some of these efforts.

Cloud computing companies, which operate vast data centres that provide computing power and software to businesses, would become a new technological front just as China has pushed back on the US roadblocks.

On Monday, Mr Wang Yi, China’s top foreign affairs official, told Secretary of State Antony Blinken that Washington needed to stop interfering with China’s technological development.

But US officials fear Beijing could use Chinese data centres in the US and abroad to gain access to sensitive data, echoing concerns about Chinese telecom gear and TikTok.

Cloud computing is a crucial behind-the-scenes engine of the digital economy, enabling services like video streaming and allowing companies to run artificial intelligence programs.

Ms Samm Sacks, a cyber policy fellow at the New America think-tank, said the interest in cloud computing reflected the Biden administration’s approach of looking at Chinese influence in the infrastructure of the Internet and the digital services that use the Web.

“There’s an intent to focus on the whole ecosystem across those layers,” she said.

US efforts to hinder Chinese tech firms have had mixed success. Restrictions on suppliers to Huawei hurt 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 push the Chinese Internet giant ByteDance to divest TikTok have been unsuccessful.

The global cloud computing market is substantial, with total public cloud revenues of US$544 billion (S$729 billion) in 2022, according to Synergy Research Group.

In the US, Chinese companies account for a tiny fraction of the cloud market, despite having data centres in Silicon Valley and Virginia, said Synergy chief analyst John Dinsdale.

But Chinese cloud companies are making inroads in Asia and Latin America.

Huawei’s chair said in 2022 that his company had seen “rapid growth” in its cloud business.

In May, Huawei hosted a cloud conference in Indonesia.

Alibaba convened a gathering in Mexico in 2022 to promote its cloud products.

As many Chinese companies benefit from major government subsidies, experts fear the Chinese cloud computing providers might be able to offer contracts below the rates of their US competitors.

The US government could find a way to offer foreign assistance of its own or urge American cloud providers to provide benefits to customers, like free training, to counter the Chinese companies’ inducements. NYTIMES