China’s Alibaba Cloud Focus Of U.S. Government Probe: Report

The investigation is looking at how Alibaba Cloud stores U.S. customers’ data and whether the Chinese government can access and interfere with it, according to Reuters.

The Biden administration is examining whether Alibaba Cloud, the cloud computing division of China-based e-commerce giant Alibaba, presents a national security risk to the United States, according to a Reuters report today.

The investigation comes as the U.S. government is ratcheting up its scrutiny of Chinese technology companies’ involvement with U.S. companies, Reuters said, citing three people briefed on the issue.

The U.S. government is looking at how Alibaba Cloud stores data, including personal information and intellectual property, of its U.S. customers, and whether the Chinese government can access that data and otherwise interfere with it, according to Reuters.

Alibaba Cloud got its start in 2009 and now holds the top market shares in China and Asia. It has 20 cloud regions in Asia and an additional five worldwide – including in Virginia and Silicon Valley -- with 80 total availability zones, but lacks as significant a presence in Europe and the Americas as its rival large cloud providers. Its parent company cited Alibaba Cloud as its “second pillar of growth” in its annual report for the year ended March 31, 2021. Alibaba Cloud saw a 50 percent increase in year-over-year fiscal revenue to approximately $9 billion and has more than 4 billion customers, according to the annual report.

Reuters said U.S. regulators eventually could force Alibaba Cloud to reduce the risks of it cloud business or ban Americans domestically and abroad from using its cloud. The U.S. Department of Commerce’s Bureau of Intelligence and Security is leading the investigation, according to the news agency.

Alibaba, in its annual report, recognized increasing export control, economic and trade sanctions that have been threatened and/or imposed by the U.S. government on a number of China-based technology companies, including ZTE Corp. and Huawei Technologies.

“These sanctions and actions have raised concerns that there may be increasing regulatory challenges or enhanced restrictions against China and other China-based technology companies, including us, our affiliates and our business partners, in a wide range of areas such as data security, emerging technologies, ‘dual-use’ commercial technologies that could be deployed for surveillance or military purposes, import/export of technology or other business activities,” Alibaba said in the report. “In addition, U.S. entities and individuals with whom we have existing contractual or other relationships may be prohibited from continuing to do business with us, including performing their obligations under agreements involving our supply chain, logistics, software development, cloud services and other products and services.”

Alibaba became the official cloud services partner of the Olympics in 2017 in a deal that runs until at least 2028. Research and advisory firm Gartner ranked Alibaba Cloud with “Visionary” status in its Magic Quadrant for Cloud Infrastructure and Platform Services report last year that was led by Amazon Web Services, followed by Microsoft and Google. Alibaba Cloud also was a “Leader” in Gartner’s Magic Quadrant for Cloud Database Management Systems report released in December.