The Biden administration is preparing to restrict Chinese companies’ access to U.S. cloud-computing services, the Wall Street Journal reported on Tuesday. If adopted, the new rule would likely require U.S. cloud-service providers such as Amazon and Microsoft to seek U.S. government permission before providing cloud-computing services that use advanced artificial intelligence chips to Chinese customers, the newspaper said.
The move could further strain relations between the world’s two economic superpowers and comes as China’s tech firms look to expand overseas to become leaders of the global digital economy. The report said the U.S. Commerce Department is preparing to introduce new rules that would force makers of computer graphics processing units (CPUs) used for A.I. processing to obtain a license from the U.S. government before exporting them to China, a move that could dent sales for Nvidia and AMD. It also said the U.S. government is considering more restrictive curbs on the export to China of chips designed for processing images and audio. This move could exacerbate the current clampdown on GPU exports to China, fueling a burgeoning black market in the country.
Getting China to provide more apparent market access in its vast and growing cloud and digital economy will be challenging as it sees its restrictions as essential to regime stability. But the United States should remain committed to pursuing this issue in every forum involving China and continue prioritizing broader cloud and digital market access to develop a comprehensive global data and digital trade strategy.
Achieving the first goal will be difficult because existing export control laws do not explicitly limit cloud computing service providers (CSPs) from providing access to controlled technology supporting military, security, and intelligence services end users or end users in China. However, the Bureau of Industry and Security (BIS) arguably has statutory authority to expand the scope of controls to achieve this goal. In addition, a recent media report alleges that at least one problematic actor in China has found a way around the October 7 export control regulations by accessing controlled chips via CSPs.
Achieving the second goal will be more straightforward but would require a rethink of the U.S. approach to dealing with the global data and digital issues it faces. The current approach is ad hoc and not targeted to the global challenges that need to be addressed, such as China’s digital protectionism and China’s violations of global trade rules. A new, more focused, and strategic approach is needed if the United States hopes to maintain its position as the leader of the global digital economy. That starts with recognizing that the best solution for most of these issues is in global multilateral fora and multilateral negotiations rather than unilaterally or bilaterally in the context of one-on-one meetings.
