U.S. Seeks to Lump Cloud Computing Into China Tech Restrictions

U.S. Seeks to Lump Cloud Computing Into China Tech Restrictions
Photo by Solen Feyissa / Unsplash

The Lede: The Biden administration has announced that it is preparing to impose restrictions on access to cloud-computing services from U.S. providers by Chinese companies

What We Know:

  • The Commerce Department is expected to unveil new proposed restrictions on cloud-computing that aim to close a significant loophole that national security analysts have warned could be exploited by Chinese AI companies to bypass the current export rules. By using U.S. cloud services, customers are able to use the powerful computing capabilities offered by the providers without having to physically purchase the advanced equipment, such as high-end chips, that are on export control lists. The proposed roles would require obtaining permission from the U.S. government to offer cloud services to Chinese companies, particularly in AI uses.
  • U.S. cloud computing providers Amazon, Microsoft, and Oracle have an existing presence in the Chinese market. For Microsoft’s part, a separate business entity called 21Vianet handles services in China, mostly to non-Chinese companies planning to access the China market. That entity’s network is physically separate from the rest of Microsoft’s Azure cloud infrastructure. However, Oracle has a significant role as the cloud provider for TikTok’s U.S. operations as well as holding a minority ownership stake in TikTok Global.
  • Restrictions on the semiconductor industry are expected to be finalized and issued in the coming weeks along with the possible new cloud-computing rules. The U.S. is also pursuing a unification of export control lists with the Netherlands and Japan. Aside from export restrictions, U.S. officials have also considered measures against Chinese cloud service providers such as Alibaba and Tencent.  

The Background: Oracle announced in June that it had reached a record high of $50 billion in revenue for its fiscal year 2023. In addition to cooperating with Ampere and AMD, the company has partnered with the advanced AI chipmaker Nvidia to offer cloud AI supercomputing services. The Biden administration has coordinated supply chain curbs on China’s access to various advanced chip technologies exported by the U.S. and its allies. Lately, China has responded to these measures with export restrictions on two metals used in advanced chip production. This follows Beijing’s curb on Chinese imports of products from the U.S. chip maker Micron Technology.

Likely Outcomes:

  • This new policy would expand the scope of the technology export control measures to include cloud computing among semiconductors and related equipment including chip-making machines. It would push the competition into the realm of non-physical commerce as a new frontier of ‘de-risking,’ which may trigger further retaliatory measures on the part of Beijing. Still, Chinese companies may resort to domestic alternatives for cloud computing for local purposes. While American cloud service companies hold relatively small market share in China, international applications may yet run into obstacles following these new U.S. policies.
  • The escalation of the technological competition between the U.S. and its allies with China may blunt any positive sentiment attached to Secretary of the Treasury Janet Yellen’s visit to China this week. It remains to be seen whether her visit will change the course of the rapidly deteriorating relations between the superpowers and the corresponding macroeconomic conditions moving forward.


“If any Chinese company wanted access to Nvidia A100, they could do that from any cloud service provider. That’s totally legal.” - Emily Weinstein, research fellow at Georgetown Center for Security and Emerging Technology

"Leading tech companies in China have taken the majority of domestic cloud computing market, which have phased in a relatively established ecosystem, while American companies including Amazon and Microsoft only hold a relatively small market share.” - Xiang Ligang, director-general of the Information Consumption Alliance

Good Reads:

U.S. Looks to Restrict China’s Access to Cloud Computing to Protect Advanced Technology (WSJ)

The US could restrict Chinese companies from using cloud service providers like Amazon and Microsoft (Business Insider)

Oracle's cloud business, which runs TikTok, could be hurt the most from Biden's new proposed restrictions for China (Business Insider)

China's Restrictions On Semiconductor Metals, Biden's Cloud Computing Ban: Which Companies Are In The Line Of Fire? (Bezinga)

Is cloud computing the next target in the US-China tech war? (Techwire Asia)

Restricting China’s access to US cloud computing services is ill-fated: industry analyst (Global Times)