US scrutinizes Alibaba cloud for potential national security risks

Alibaba company. (photo: Vanguard)

The administration of the president of the United States, Joe Biden, is reviewing the cloud business of the giant of the electronic commerce, Alibaba, to determine whether or not it represents a risk to the national security of the U.S, according to three people briefed on the matter. All this in the midst of a US government review of Chinese tech companies’ dealings with American ones.

The focus of the research is on how the company stores US customer data, including personal information and intellectual property, and if the GChinese government could access themexplains the journalist, Alexandra Alper, from the Reuters agency.

The cloud business in Alibaba, under the magnifying glass

China‘s potential to disrupt US users’ access to their information stored in Alibaba’s cloud is also a cause for concern, said one of the three sources.

US regulators could ultimately choose to force the company to take steps to reduce the risks posed by the cloud business or ban Americans at home and abroad from using the service altogether.

The former president’s Department of Commerce, donald trump, was worried about Alibaba’s cloud business, but the Biden administration launched the formal review after he took office in January, according to one of the three people and a former Trump administration official.

Alibaba’s cloud business in the US is small, with estimated annual revenue of less than $50 million, according to the research firm Gartner Inc. But if regulators finally decide to block transactions between US companies and AlibabaCloud, it would hurt the bottom line of one of the company’s most promising businesses and deal a blow to the reputation of the company as a whole.

Alibaba Cloud.  (photo: Jesus Cuesta)
Alibaba Cloud. (photo: Jesus Cuesta)

Alibaba does not provide explanations or pronounce itself on the matter

A Commerce Department spokesman said the agency does not comment on the “existence or nonexistence of transaction reviews.” The Chinese Embassy in Washington did not respond to a request for comment.

Alibaba declined to comment. In its most recent annual report, it noted similar concerns about operating in the United States, saying that US companies that have contracts with Alibaba “can be prohibited from continuing to do business with us, including the performance of its obligations under agreements involving our cloud services.”

According to Alper, the investigation into Alibaba’s cloud business is being run by a small office within the Department of Commerce known as the Intelligence and Security Office.

Agent working on a computer.  (photo: Global Strategy)
Agent working on a computer. (photo: Global Strategy)

It was created by the Trump administration to exercise sweeping new powers to prohibit or restrict transactions between US companies and US companies. Internet, telecommunications Y technology of “foreign adversary” nations such as China, Russia, Cuba, Iran, North Korea and Venezuela.

The office has particularly focused on Chinese cloud providers, one of the sources mentioned, amid growing concern about the potential for data theft and access disruption by China.

Customer cybersecurity is at stake

The Trump Administration issued a warning in August 2020 against Chinese cloud providers, including Alibaba, “to prevent the most sensitive personal information of US citizens and the most valuable intellectual property of our companies from being stored and processed in cloud-based systems accessible to our foreign adversaries.”

Cloud servers are also considered mature for cyber criminals launch cyber attacks because they can hide the origin and offer access to a wide range of client networks.

Cyber ​​attack.  (photo: ComputerHoy)
Cyber ​​attack. (photo: ComputerHoy)

Although there are few public cases in which the Chinese government forces a technology company to hand over sensitive customer data, Chinese hacker accusations reveal their use of cloud servers to gain access to private information.

For example, hackers connected to the Chinese Ministry of State Security penetrated HPE’s cloud computing service and used it as a launch pad to attack customers, looting reams of corporate and government secrets for years as prosecutors Americans say it was an effort to boost Chinese economic interests.

Alibaba calls itself a “Growth Pillar”

Alibaba, the world’s fourth-largest cloud provider according to research firm Canalys, has about 4 million customers and describes its cloud business as its “second growth pillar.” It saw a 50% increase in revenue to $9.2 billion in 2020, though the division accounts for only 8% of total sales.

It has boasted business relationships with units of major American companies, including Ford Motor Co., IBM, RedHat and Hewlett-Packard Enterprise, according to press releases.

While the sweeping powers of the Trump era do not cover foreign affiliates of American companies, regulators have previously found ways to link them to their parent companies, which in turn may be subject to restrictions.

Ford logo.  (photo: Ford Media Center)
Ford logo. (photo: Ford Media Center)

Alibaba’s projects in the United States

Before technology tensions between the United States and China began to boil, Alibaba had big ambitions for its US cloud business. In 2015, launched a cloud computing center in Silicon Valley, the first outside of China, with plans to compete with amazon, microsoft Y Google. It later added additional data centers there and in Virginia.

A person familiar with the matter says the company scaled back its US tactic during the Trump presidency as tensions with China escalated, Alexandra Alper claims.

In 2018, the US authorities blocked an offer of Ant Financial, affiliated with Alibaba; now AntGroup, to acquire the American money transfer company MoneyGram International Inc. for reasons of national security.

AntGroup.  (photo:
AntGroup. (photo:

But a move to put Ant Group on a commercial blacklist failed and Biden reversed an executive order that banned his Alipay mobile payment app.

Biden, like Trump, has increasingly placed restrictions on Chinese companies. Last month, the US government placed investment and export restrictions on dozens of Chinese companies, including major drone maker DJI, accusing them of complicity in the oppression of China’s Uyghur minority or aiding the armed forces.

With information from Reuters, Alexandra Alper


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