According to recent reports, Chinese enterprises, including state-linked research institutions and colleges, are turning to Amazon Web Services (AWS) and other cloud providers to gain access to advanced U.S. processors and artificial intelligence (AI) technology. These technologies, such as Nvidia’s A100 and H100 chips, cannot be shipped directly to China due to US government laws aimed at limiting China’s military capabilities. However, by utilizing cloud services, Chinese organizations can circumvent these prohibitions and gain access to the superior processing power and AI capabilities required for their projects.
This strategy, which does not currently violate US export restrictions, includes Chinese firms accessing AWS services through intermediaries. For example, Shenzhen University used an intermediary to spend around $28,000 on AWS cloud servers powered by restricted Nvidia chips for an unnamed project. Similarly, Zhejiang Lab attempted to purchase cloud services from AWS to support its large language model (LLM) development, however it is unclear whether this transaction was completed.
The United States government is aware of this gap and is working to implement new legislation to strengthen control over remote access to US technology via cloud services. Legislation has been suggested to allow the Commerce Department to more carefully restrict such access, but it has yet to be passed.
These events underscore how US corporations like AWS are benefiting from China’s expanding demand for computer power, even as geopolitical tensions remain over technological access.
The Biden administration is considering tightening these laws, which would force cloud companies to report and perhaps limit sales to foreign users, particularly those associated with Chinese military or AI initiatives. The new laws could also apply to other innovative technologies, such as semiconductor production equipment.
These efforts reflect the broader goal of the US government to limit China’s access to revolutionary innovations that could be used to improve its military or intelligence capabilities, amid increasing geopolitical tensions.
These laws could have a big impact on US IT companies. China is a big market for cloud services, and tightening these rules might impact their revenue streams and market position in the region. At the same time, following US legislation is critical to avoid legal consequences and continue global operations.
