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Despite the reported US plan to further assault China's artificial intelligence (AI) sector including new restrictions on American cloud computing service export, Chinese cloud computing firms have already reached a higher standard and has largely achieved self-reliance in the technology, experts said. 

The Biden administration is preparing to restrict Chinese companies' access to US cloud computing services, according to a recent report from the Wall Street Journal (WSJ), citing people familiar with the developments. 

The WSJ report noted that the new plan would require US cloud service providers, such as Amazon and Microsoft, to seek US government permission before offering cloud computing services that use advanced AI chips to Chinese customers.

Industry observers noted that the planned restriction on China's high-end cloud services however will also move to impede the development of the US' own cloud business.

Plan likely to backfire 

The US government's proposed cloud restriction plan is seen as a means to close a "significant loophole", according to the WSJ report, adding that the national-security analysts have warned that Chinese AI companies might have bypassed the current export controls rules by using cloud services. 

It alleged the services could allow customers to gain computing capabilities without purchasing advanced equipment such as the A100 chips from Nvidia.

The reported US restriction on cloud services could be interpreted as a supplementary measure of the previous ban on advanced chips export, which may not align with the actual situation, Bi Qi, chief expert of China Telecom, told the Global Times. 

The US may be able to achieve its purpose of slowing down China's development pace in some high-end manufacturing and retaining the sector in the US through restricting high-end chips, said Bi.

Restricting export of American cloud services to China is, to some extent, tantamount to reducing the number of potential clients for high-end US manufacturing, which would, eventually, limit high-end manufacturing in the US, Bi said, stressing that such a move is not in line with the US interest at all. 

Bi noted that the US government would likely stick to imposing restrictions on high-end, arithmetic-intensive cloud services rather than on common cloud services, limiting the impact on enterprises from both sides.

For instance, Bi said that US cloud service providers including Microsoft and Amazon do not have much of an advantage over Chinese cloud service companies in terms of efficiency and production cost.

Chinese companies and the industry analysts have expressed confidence in the domestic development of the cloud computing and service sector, as Chinese enterprises have largely advanced in the sector with considerable experiences and technological advancements. 

Home-grown innovations  

In 2022, the size of China's cloud computing industry exceeded 300 billion yuan ($42 billion), accounting for 14.6 percent of the global market with an average annual growth rate of over 30 percent, official data from China's Ministry of Industry and Information Technology showed. China's market scale for cloud computing is expected to grow to 380 billion yuan, according to media reports.

A representative from the iSoftStone, a leading China-based IT services provider, said during the recently JD Cloud Summit that the industry does not worry about the reported US restrictions on cloud services as Chinese enterprises have been progressing well, and major industry players have been adapting to home-grown technologies.

A representative from Huawei Technologies told the Global Times at the summit that the company has its own codes and self-developed technology for cloud computing, adding that Huawei could continue to develop its business strongly even if the US imposes sanctions on exports.

Bi stressed that the development of China's domestic cloud service industry including private and state-owned enterprises is healthy, with the firms capable of offering nearly all types of cloud services at home and holding an advantage over foreign companies in terms of cost performance.  

Bi also said that Chinese cloud service providers are unlikely to be affected by using the normal cloud services overseas, while the use of high-end cloud services will be impacted due to the possible restrictions. 

Bi called for Chinese enterprises to step up their endeavors in the fields critical for high-end cloud services, while continuing strengthening the development of common cloud services. 

Amid the rapid progress made by Chinese enterprises, some US enterprises however have been opening up channels to strengthen cooperation with Chinese counterparts despite the US government's tightening chip controls to China. 

On July 11, Intel launched the Habana Gaudi2 processor for deep learning, which is viewed as an exclusive offer to relevant Chinese companies and can be adopted to accelerate AI training and reasoning tasks. That processor will be equipped by major Chinese server vendors, indicating that Intel is going all out to compete with Nvidia in the Chinese market.

Nvidia said in March that it has developed a China market tailored version of its H100 chip. The new chip, called the H800, is being used by the cloud computing units of Chinese technology firms such as Alibaba Group Holding, Baidu and Tencent Holdings, Reuters reported, citing a company spokesperson from Nvidia.

Nvidia had previously designed a chip called the A800 that reduced some capabilities of the A100 to make the A800 legal for export to China after the US government's high-end chip ban which forces the company to exort the A100 and H100 - its two most advanced semiconductor chips to Chinese market, under the disguise of protecting US national security.

As many US enterprises are forced to implement the ban, they will try to find alternative ways to work around the government restrictions, and the implementation of the restriction measures are "riddled with holes," Xiang Ligang, a veteran telecommunication and information industry expert, told the Global Times.

International Data Corporation's data showed that by the end of 2022, Alibaba, Tencent, Huawei, China Telecom and Amazon are the top five cloud computing companies, and the first four companies take over 64 percent of the market share and the Amazon accounts for 8.6 percent.

"Leading tech companies in China have taken the majority of domestic cloud computing market, which have phased in a relatively established ecosystem, while American companies including Amazon and Microsoft only hold a relatively small market share," said Xiang.