China’s Cloud Computing Firms Raise Concern for U.S.

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 last 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.

American officials have discussed whether they can set tighter rules for the Chinese companies when they operate 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 the American 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, U.S. officials are potentially widening the scope of the technological tensions between Washington and Beijing. In recent years, the United States has choked China’s access to crucial technologies while trying to limit the reach of Chinese tech and telecommunication companies abroad.

Former President Donald J. Trump directed his administration toward hindering Chinese telecom 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 Biden has continued some of these efforts.

Cloud computing companies, which operate vast data centers that provide computing power and software to businesses, would become a new technological front just as China has pushed back on the U.S. 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 with China’s technological development.

But American officials fear that Beijing could use Chinese data centers in the United States 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.

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 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.

U.S. efforts to hinder Chinese tech firms have had mixed success. American restrictions on suppliers to Huawei 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 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 $544 billion last year, according to Synergy Research Group. In the United States, Chinese companies account for a tiny fraction of the cloud market, despite having data centers in Silicon Valley and Virginia, said John Dinsdale, the chief 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 convened 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 while the Federal Communications Commission could bar some Chinese companies from providing telecom services in the United States, those firms had “still been able to offer services like cloud computing.” Mr. Warner wrote legislation that would give the White House more power to police Chinese technology.

In April, nine Republican senators wrote to a group of administration officials encouraging them to investigate and penalize Chinese cloud companies that 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 handle the Chinese cloud computing companies, four people with knowledge of the matter said.

The Commerce Department has looked at creating tighter rules that would govern the Chinese cloud providers, two of the people said. It could create the rules under a new legal authority that allows 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 started developing a strategy for raising American concerns about Chinese cloud computing providers with other countries, two people with knowledge of the matter said. The agency has already quietly brought the topic up in conversations with foreign governments, which can help diplomats understand what messages work best, one of the people said.

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

A State Department spokesman said it was critical for every aspect of the global internet — including data centers — to be powered by trustworthy equipment. The spokesman added that the agency was also focused on reducing risks associated with wireless equipment, undersea telecom cables and satellites.

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