Pressed by Republican senators to sanction Chinese cloud computing companies, US Commerce Secretary Gina Raimondo made it clear that she and the Biden administration would not be painted as weak on China.
“I’ve put over 200 Chinese companies on the entity list in my tenure,” she told the Senate Appropriations Committee, “and we are actively, constantly investigating additional threats and if and as we think companies need to go onto the list, I will not hesitate.”
On April 25, Senator Bill Hagerty (R-TN), ranking member of the Senate Banking Subcommittee on National Security and International Trade and Finance, and eight other Republican senators sent a letter to Raimondo, Treasury Secretary Janet Yellen and Secretary of State Antony Blinken asking them to take decisive action against Alibaba Cloud, Huawei Cloud and other Chinese cloud services providers including Baidu and Tencent.
“Open-source information shows that Huawei Cloud and PRC-based cloud computing services not only pose a threat to US national security and economic security, but also are increasingly engaging with foreign entities-in some cases sanctioned foreign entities-that are directly challenging the national security and economic security interests of the United States and our allies and partners. We urge you to use all available tools to engage in decisive action against these firms, through sanctions, export restrictions, and investment bans, and to further investigate PRC cloud computing service companies,” they wrote.
An exchange posted on Senator Hagerty’s website reads
The examples that we provide in the letter show that China’s military civil fusion strategy is alive and well. Given China’s laws that compel every Chinese citizen and Chinese company to assist in national security or intelligence work, it should be common sense to deny US exports of these countries,” Hagerty said. “Yet companies like Alibaba Cloud that are not on the Entity List and still have access to US technology and exports and even have operations here in the United States.”
“Given the far reach of China’s national security related laws and their military civil fusion strategy, do you agree that the PRC cloud service providers that operate in the United States pose a threat to our national and our economic security?” Hagerty asked.
The letter goes on to note specific but previously known examples of the companies’ work with China’s military, security and intelligence services, including domestic monitoring and satellite imagery. However, like military civil fusion company Boeing in the US, they primarily serve commercial markets.
For reference, “military civil fusion” is a common practice, not a nefarious Chinese plot. In February, Boeing announced that it had been “selected by the US Air Force as the prime contractor for the nation’s intercontinental ballistic missile (ICBM) guidance subsystems support. The contract is worth up to $1.6 billion over 16 years.”
Alibaba Cloud is the fourth largest cloud service provider in the world and the largest in China. It provides database, storage, data analytics, networking, application, security and other services to the finance, e-commerce, logistics and other sectors worldwide.
Employment website indeed.com currently lists 30 positions available at Alibaba in Sunnyvale, California, including software engineer, photonics expert, research scientist and business manager, with annual compensation ranging from $110,000 to $240,000.
Crunchbase estimates that tech companies in the US have cut more than 135,000 jobs so far this year. Senator Hagerty and his colleagues would presumably like to eliminate jobs at Alibaba as well – and the technological expertise they represent.
The level of expertise is high. For example, candidates for the position of photonics expert must have a Ph.D. degree in electrical engineering, applied physics or a related field, and experience in the design, development and fabrication of silicon photonics chips for optical interconnects.
Huawei Cloud is only about half the size of Alibaba Cloud, but it has been advancing rapidly. Since being added to the Entity List in August 2020, Huawei Cloud, as reported on its website, has received several certifications and awards, including.
August 2020 – The first cloud service provider in Asia-Pacific to earn the PCI 3DS certification for global payment account data security.
September 2020 – The first cloud service provider to earn the ISO 27799 certification for information security management.
November 2021 – Awarded both the ISO/IEC 27034 application security standard certification and the CSA STAR 2021 Gold Certification by the British Standards Institution.
November 2020 – Listed as a leader in predictive analytics and machine learning by Forrester Research.
December 2020 – Placed by Gartner in itsMagic Quadrant for Cloud Database Management Systems for its GaussDB database products, which help enterprises migrate databases to the cloud.
March 2021 – Named by Canalys as one of the top four and as the fastest growing cloud service provider in Latin America.
May 2021 – Ranked No. 1 in China’s financial cloud infrastructure market by IDC.
December 2021 – Ranked No.1 in China’s public cloud service market for machine learning by IDC.
In March 2022, the Huawei Cloud Summit Middle East and Africa was held in Dubai with more than 1,000 government officials, customer representatives and industry experts attending.
The conference considered how cloud computing can be used to facilitate public services, finance, carriers, media, e-commerce and gaming.
In September 2022, the first Huawei Cloud Indonesia Summit was held in Jakarta with local industry leaders and experts, business partners and the media attending to discuss the digital economy.
In November, Indonesia became a new region for Huawei Cloud with more than 60 services to be launched in areas including e-commerce, short video platforms, online gaming insurance and finance.
In November 2020, Huawei Cloud and BCB Blockchain of Singapore established a partnership to develop smart city solutions.
In September 2022, the Huawei Cloud Accelerator, a program aimed at promoting the development of start-ups with the help of venture capitalists, was announced at the Huawei Cloud Global Startup Founders Summit held the Huawei Cloud Accelerator, a program aiming at empowering startups in Shenzhen.
In China, the company reports that more than 800 government clouds are now built on Huawei Cloud, the company’s “One City, One Cloud” concept has been implemented in more than 150 cities, and more than 300 financial institutions including six major banks, 90% of the top 50 e-commerce companies and 90% of the top 30 auto companies use Huawei Cloud.
Other user industries include e-commerce, finance, energy, manufacturing, pharmaceuticals and gaming. Outside China, Huawei Cloud has a presence in the Asia-Pacific, the Middle East, Africa, Latin America and Europe. Aside from not being able to work in the US, being on the Entity List does not seem to be a major problem.
Will US politicians be able to throw a spanner into the works of other Chinese cloud service providers? Perhaps. They could force US companies including Salesforce, IBM, VMware and Fortinet to sever their ties with Alibaba Cloud, just as they forced Oracle to sever its ties with Huawei.
That prompted Huawei to develop its own ERP software, which it announced in April. Something similar would probably happen if Alibaba Cloud were put on the Entity List managed by the Commerce Department’s Bureau of Industry and Security (BIS).
Being put on the list can be a serious problem, but it also forces the targeted company to try harder. In the Global South and other parts of the world where US sanctions are not recognized, it might be called the BIS Certificate of Quality.