The Biden administration is reviewing e-commerce giant Alibaba’s cloud business to determine whether it poses a risk to U.S. national security, according to three people briefed on the matter, as the government ramps up scrutiny of Chinese technology companies’ dealings with U.S. firms.
The focus of the probe is on how the company stores U.S. clients’ data, including personal information and intellectual property, and whether the Chinese government could gain access to it, the people said. The potential for Beijing to disrupt access by U.S. users to their information stored on Alibaba cloud is also a concern, one of the people said.
U.S. regulators may ultimately choose to force the company to take steps to reduce the risks posed by its cloud business, or ban the service entirely for Americans at home and abroad.
Former President Donald Trump’s Commerce Department was concerned about Alibaba’s cloud business, but the Biden administration launched the formal review after he took office in January 2021, according to one of the three people and a former Trump administration official.
Alibaba’s U.S. cloud business is small, with annual revenue of less than an estimated $50 million, according to research company Gartner Inc. But if regulators ultimately decide to block transactions between American companies and Alibaba Cloud, it could damage 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.
A Commerce Department spokesperson said the agency does not comment on the “existence or non-existence of transaction reviews.” The Chinese Embassy in Washington did not respond to a request for comment.
Alibaba declined to comment. It did flag similar concerns about operating in the U.S. in its most recent annual report, saying U.S. companies that have contracts with Alibaba “may be prohibited from continuing to do business with us, including performing their obligations under agreements involving our … cloud services.”