Feds probe Alibaba’s cloud unit over national security concerns: report

The Biden administration has reportedly launched a probe of China-based e-commerce giant Alibaba’s cloud-computing unit over concerns it could pose a risk to national security.

The investigation is focused on Alibaba’s data storage practices for US clients, sources familiar with the matter told Reuters. Regulators will assess whether the Chinese government could have access to sensitive information or the ability to block access to data stored on the Alibaba cloud.

The review was ordered shortly after President Biden took office in January, the report said. Prior to that, the Commerce Department under former President Donald Trump also expressed concern about the unit.

The investigation could result in regulatory action against Alibaba’s cloud business, including a potential US ban.

A representative for the Commerce Department told Reuters the agency does not comment on the “existence or non-existence of transaction reviews.” Alibaba declined to comment.

Alibaba’s cloud-computing unit has yet to achieve widespread use in the US. The company reportedly said in its annual report that US firms “may be prohibited from continuing to do business with us, including performing their obligations under agreements involving our … cloud services.”

The US government stepped up scrutiny of Chinese firms during an ongoing trade dispute between the two nations. US authorities have long accused China of intellectual property theft.

In 2019, the Trump administration placed Chinese tech giant Huawei on an economic blacklist due to national security concerns.

In August 2020, Trump’s State Department called for an expanded “clean network” initiative in order to “prevent US citizens’ most sensitive personal information and our businesses’ most valuable intellectual property, including COVID-19 vaccine research, from being stored and processed on cloud-based systems accessible to our foreign adversaries.”

And last March, the Federal Communications Commission identified Huawei and four other Chinese companies as posing “an unacceptable risk to US national security.”

Alibaba’s regulatory concerns aren’t limited to the US market. The Chinese government has repeatedly fined Alibaba and other tech companies over antitrust concerns.