The United States aims to limit China’s utilization of cloud computing in order to safeguard advanced technology

The United States aims to limit China's utilization of cloud computing

The Biden administration is getting ready to impose restrictions on Chinese companies’ access to American cloud-computing services, which could escalate tensions between the two economic powerhouses. Under the proposed rule, U.S. cloud-service providers like Amazon and Microsoft would likely need permission from the U.S. government before offering cloud-computing services to Chinese customers that utilize advanced artificial-intelligence chips. This move by the Biden administration follows other recent actions in the ongoing struggle between Washington and Beijing for access to cutting-edge technology supply chains.

The aim of this restriction is to address a significant loophole, as national-security analysts have warned that Chinese AI companies may have circumvented existing export control regulations by utilizing cloud services. These services allow customers to access powerful computing capabilities without directly purchasing controlled equipment, including chips like Nvidia’s A100 chips.

The U.S. Commerce Department is expected to announce this action in the coming weeks as part of an expansion of its semiconductor export control policy. This ban on cloud services would be the latest in a series of retaliatory measures between the United States and China concerning semiconductors and advanced technologies.

The Biden administration is increasingly concerned about China’s advancements in artificial intelligence and its potential military applications, leading to intensified efforts to restrict chip transfers and other products and services to Chinese companies. In response, China has retaliated, including banning certain firms from purchasing products from Micron Technology, a major U.S. memory-chip manufacturer.

Treasury Secretary Janet Yellen has expressed hopes of halting the deterioration of U.S.-China relations, as American officials fear China may cut off access to crucial goods such as components for electric-vehicle batteries. However, Chinese officials argue that the U.S. is attempting to impede China’s economic development.

In addition to potential restrictions on cloud services, an alternative proposed by experts is to limit U.S. cloud companies from providing services to users associated with military, security, or intelligence services in China and other concerning countries.

The new policy would expand the export control policy’s scope beyond semiconductor and equipment manufacturers, affecting cloud-service providers like Amazon Web Services and Microsoft Azure, which have a significant presence in the Chinese market. Neither Microsoft nor Amazon has commented on this potential action at the time of reporting.

In October, the Biden administration introduced restrictions to curb the export of advanced chips and equipment, but these regulations have yet to be finalized. The updated regulations, including the expansion of restrictions on AI chips made by Nvidia and other manufacturers, are expected to be issued in the coming weeks. The new rule regarding cloud computing will be part of this broader effort.

As part of the update, the United States is also set to align its list of controlled chip-making equipment with the Netherlands and Japan. The Dutch government recently published regulations requiring its companies to seek government approval before exporting certain types of chip-making equipment.

Under the rule announced last year, U.S. chip makers are already required to obtain licenses from the Commerce Department for exporting specific chips used in advanced AI calculations and supercomputing, particularly those utilized in modern weapons systems.

Outside the export control regime, U.S. officials and lawmakers have been considering measures to curb the operations of Chinese cloud-service providers such as Alibaba and Tencent within the United States.