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For China And US, Battling For The Cloud, With Words         

In recent months, China has been in the headlines as the Trump administration has taken shape, on all matters of issues, from trade to currency dynamics to climate change and the ongoing situation with North Korea.

But amid the words that fly back and forth, sometimes amid skirmishes on the above subjects, a battle is being fought on another front, too, as The New York Times noted, with cloud computing as a new(ish) theater. Globally focused companies have been vying to establish beachheads in China and the United States.

Late last month more than 50 members of Congress told the Chinese U.S. ambassador via missive that the competitive landscape is an uneven one. China has a number of restrictions on cloud computing, noted the lawmakers, with looming regulations in that country that would mandate that intellectual property go to Chinese firms and that foreign multinationals, seeking entry into that country, would be barred from “operating or competing fairly in China…. These restrictions are fundamentally protectionist and anticompetitive.”

The letter, noted the Times, comes in the wake of increased complaint by companies seeking to do business in China. The complaints have taken an indirect route, said the Times, with lawmakers acting as mouthpieces more vocal that the companies themselves, who may be frozen out by the Chinese should they complain directly.

And of course, with the nascent Trump administration in place, the thought may be that more strident talk about competition might in fact pry China open, perhaps even a little bit. The Times quoted Jake Parker, who serves as vice president for China operations at the U.S.-China Business Council, as stating that “there are companies which in prior years have been strong supporters in Washington of the U.S.-China relationship, who are much quieter and even waiting to see if a tougher approach might get more results with China.”

And at the moment, the landscape may be a bit clouded by the ongoing dispute with North Korea over the latter’s nuclear weapons-focused activities, where some concessions have been offered by the Trump administration for Chinese support. One salvo in the war on words came earlier in the week, on Tuesday (April 18), when William Zarit, chairman of the American Chamber of Commerce in China, said that “if the United States gives concessions in the trade area so that we don’t push as hard on leveling the playing field in all these different areas, I think it’s a shame.”

Past efforts by the Obama administration, informed a bit by the private sector, led to some capitulation by the Chinese government. In one case, noted the Times, the Chinese walked back on stipulations that U.S. technology companies operating in China “turn over” encryption keys.

In the more recent joust over cloud computing, China has stated that U.S. firms must partner up with a local (Chinese) company. And in partnership there is also a limit to how much equity foreign firms can take in Chinese entities, which truncates ownership potential. Regulations that are still in the draft stage mandate that foreign entities cannot use their own brands and logos. All of these limits come against the backdrop of a $20 billion market. Even with the potential to claim at least some slice of those billions, one general survey from AmCham last year showed that 81 percent of members queried said that they felt “less welcome” in China a bit higher than the 77 percent seen in 2015. And, noted the Times, 31 percent of respondents said the environment for investment was “deteriorating” — the most pessimistic tally to date.

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