The US under secretary of commerce for industry and security Alan Estevez recently announced that the US is considering tightening its control over Chinese access to American cloud-based technologies. it is believed that China could use these technologies to develop AI systems. 

Earlier in the week, the United States Department of Commerce's Bureau of Industry and Security issued a memorandum, reinforcing export controls on AI chips. These updated regulations will necessitate the implementation of a global licensing mandate for exporting controlled chips to any nation subject to US embargoes, including China.

Why does it matter?

These measures come in the wake of the US's endeavours to limit China's access to cloud computing services as part of its strategy to curtail China's advancement in AI. Chinese experts have voiced their concerns, suggesting that these restrictions are primarily politically motivated and are likely to have unintended consequences on the normal operations of businesses.

Analysts suggest that US companies, such as Amazon, Google Cloud, and Microsoft, will likely bear the brunt of the impact. For instance, Amazon Web Services (AWS) and Microsoft Azure maintain significant market share in China's cloud services sector. In a market dominated by companies such as Alibaba Cloud, Huawei Cloud, China Telecom Tianyi Cloud, and Tencent Cloud, AWS claims an 8.6 percent market share in the Chinese public cloud IaaS+PaaS market.

There is also a possibility that Chinese authorities may implement reciprocal countermeasures, affecting US companies' ability to access Chinese cloud services.

The impending restrictions on Chinese companies' access to cloud services provided by American firms could have significant repercussions for businesses on both sides of the spectrum, with the US likely to bear the brunt of the impact.