US regulators eye Alibaba’s cloud business

US authorities are currently investigating Alibaba’s cloud computing activities. If they come to the conclusion that the Chinese giant poses a threat to the country’s national security, they can ban Americans from using its cloud service.

A mistrust that does not go back to yesterday

It is a small committee linked to the Ministry of Commerce that examines the file. Dubbed the Office of Intelligence and Security, it was created under the Trump administration to exercise sweeping new powers to ban or restrict transactions between US companies and Internet, communications and technology companies from so-called “enemy” countries. Foreign countries” such as China, Cuba, Iran, North Korea and Venezuela, Cuba, Iran, North Korea and Venezuela reported. Reuters.

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However, the investigation into Alibaba’s cloud division began at the instigation of the Biden administration shortly after the Democrat took office. The investigation is particularly interested in how the company stores its US customers’ data, including their personal information and intellectual property, as well as how it can be accessed by the Chinese government.

In addition, investigators want to know if Beijing is able to prevent American customers of Alibaba from accessing their data. Distrust on the part of the White House toward the company founded by Jack Ma is not new: In 2020, the Trump administration issued a warning against Chinese cloud service providers with the aim of ” Prevent the most sensitive personal information of US citizens and our companies’ most valuable intellectual property… from being stored and processed on cloud-based systems that our foreign adversaries can access “.

As he has made clear since taking office, Joe Biden is in line with his predecessor on his anti-China policy, so this poll isn’t really surprising.

Two American flags in front of a monument.

Since 2019, the United States has been closely scrutinizing large companies from China. Photo: Caleb Fisher/Unsplash

Alibaba’s cloud business is currently very promising

If Alibaba is better known in the e-commerce sector, the Chinese giant also wants to play its part in cloud computing, which has grown exponentially in popularity since 2020 and the Covid-19 pandemic. Moreover, in the same year, the company announced an investment of $18 billion in the cloud through 2023.

Alibaba had big ambitions in the US for its cloud services. In 2015, it launched an IT hub dedicated to this technology in Silicon Valley with the desire to come in and compete with the big American names in the sector. Additional data centers were later added in California and then Virginia. However, Trump’s rise to power changed the cards. In the face of the threat, Alibaba greatly curtailed its transatlantic activities.

Today, Alibaba’s cloud business in the US is minimal with annual revenue of about $50 million. Globally, the company is the fourth cloud service provider after the American giants Amazon Web Services, Microsoft and Google. The Chinese company has nearly 4 million customers, and cloud computing is the second most promising activity after e-commerce. The cloud computing division saw its revenue grow 50% to $9.2 billion in 2020.

Alibaba, soon a new victim of the Sino-US trade war?

If the US authorities decide to take drastic measures, they can do so in different ways: either by requiring companies that cooperate with Alibaba to take measures to reduce the risks posed by the latter, or in a much more brutal way, by banning Americans altogether, both at home and abroad, to use this service.

If the latter option is chosen, Alibaba will likely be put on the infamous blacklist, where many Chinese companies, such as Huawei, are listed, preventing them from doing business with any US company. The White House could also do it differently. Last month, for example, the US government imposed investment and export restrictions on dozens of Chinese companies, including drone maker DJI, accusing them of complicity in the suppression of China’s Uighur minority or of aiding the military.

Such a measure against Alibaba’s cloud activities would be extremely detrimental to it, especially its reputation. In addition, the company has boasted of maintaining business relations with American giants such as IBM and Ford, the latter of which will be severely affected. Given the current geopolitical climate between China and the United States, which have been waging a merciless trade war since 2019, the Americans could strike a blow by punishing Alibaba, one of the most powerful companies in the empire. From the East, but also from all over the world.

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