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Chinese Firms Take Aim at International Cloud Computing

An attendee sits near a diagram illustrating cloud security during the 4th China Internet Security Conference (ISC) in Beijing, Aug. 16, 2016.

A cloud war could be in the offing, with Chinese companies trying to take on giants like Google, Amazon and Apple in the crucial data management market. The moves come in the midst of an intensifying dispute between the United States and China over data hacking, network security and other issues.

The entry of Chinese vendors including Alibaba, Baidu and Huawei will give a new twist to the dispute over cybersecurity as they compete with international players for control over data.

China's homegrown firms are not only grabbing domestic businesses but also venturing to different countries across the world. But foreign players face regulatory walls that make it difficult to tap businesses in China.

Intensifying competition in the business of cloud computing has also raised serious questions about the security of operational data, analysts said. Civilian use of this technology spans data-driven machinery, telecommunications, banking and transport systems, including plans for driverless vehicles.

FILE - A woman uses her smartphone near a booth promoting cloud services during the Global Mobile Internet Conference in Beijing, China.
FILE - A woman uses her smartphone near a booth promoting cloud services during the Global Mobile Internet Conference in Beijing, China.

Data concerns

"Many multinationals have serious concerns about the protection of their intellectual property in China, on and off line, and there have been a number of recent cases of international firms coming to believe that valuable information has been stolen from them through cyber means," Lee Branstetter, an associate professor of economics at Carnegie Mellon University's Heinz School of Policy and Management told VOA.

"All of this would give non-Chinese multinationals pause before entrusting their critical data to Chinese cloud computing service providers," he said.

But foreign companies with limited technology budgets, and those operating in China, may not have the luxury of higher-priced services offered elsewhere, analysts said.

Chinese vendors are establishing data centers in different countries and trying to tap sensitive data management business across the globe. Alibaba has established data centers in the U.S., parts of Asia, the Middle East and Europe.

But Branstetter does not think Chinese cloud vendors would pose a major challenge to the likes of Google, Microsoft and Amazon in the data management business.

"China’s efforts to keep out foreign digital players are actually a real global outlier – it is certainly the most digitally protectionist major economy. For this reason, I expect Chinese digital players to continue to be dominant at home, but I do not expect them to be very successful abroad," he said.

Growing behind the wall

Government restrictions on foreign data vendors have left the field more or less clear for homemade cloud computing firms, which are able to get major business opportunities without facing severe competition from international players. This is a massive chunk of business, considering that over one-fifth of the Fortune 500 companies are of Chinese origin.

Under the rules, foreign cloud vendors can operate in China only if they have local partners and use servers located in the country.

But the Chinese market is too big for foreign companies to ignore.

Sheila Jasanoff, director, program on science, technology and society at Harvard Kennedy School, calls for an internationally accepted set of rules on data security. Until then, she worries that rough competition in the cloud computing business may result in a major accident.

"Cloud computing is still an unruly territory. People [in the business] are making rules as they go along or taking advantage of the lack of rules. I would think a big tragedy might happen in a large airport or other facility, like a hospital system, and it would result in loss of life," she said.

Security safeguards promised to customers by cloud computing companies are "extremely opaque," Jasanoff said.

But she doesn't expect an international agreement anytime soon.