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Chinese and U.S. flags flutter outside the building of an American company in Beijing, China, January 21, 2021. REUTERS/Tingshu Wang/File Photo
WASHINGTON, D.C. — The Biden administration is investigating China Mobile, China Telecom and China Unicom over concerns the firms could exploit access to American data through their US cloud and internet businesses by providing it to Beijing, three sources familiar with the matter said.
The Commerce Department is running the investigation, which has not been previously reported. They have subpoenaed the state-backed companies and have completed “risk-based analyses” of China Mobile and China Telecom, but are not as advanced in their probe of China Unicom, the people said, declining to be named because the probe is not public.
The companies still have a small presence in the United States, for example, providing cloud services and routing wholesale US internet traffic. That gives them access to Americans’ data even after telecom regulators barred them from providing telephone and retail internet services in the United States.
The Chinese companies and their US-based lawyers did not respond to requests for comment. The Justice Department declined to comment, and the White House referred questions to Commerce, which declined to comment. The Chinese Embassy in Washington said it hopes the United States will “stop suppressing Chinese companies under false pretexts,” adding that China will continue to defend the rights and interests of Chinese companies.
Reuters found no evidence the companies intentionally provided sensitive US data to the Chinese government or committed any other type of wrongdoing.
The investigation is the latest effort by Washington to prevent Beijing from exploiting Chinese firms’ access to US data to harm companies, Americans or national security, as part of a deepening tech war between the geopolitical rivals. It shows the administration is trying to shut down all remaining avenues for Chinese companies already targeted by Washington to obtain US data.
Regulators have not yet made decisions about how to address the potential threat. But, equipped with the authority to probe internet services sold into the US by companies from “foreign adversary” nations, regulators could block transactions allowing them to operate in data centers and route data for internet providers, the sources said.
Blocking key transactions, in turn, could degrade the Chinese firms’ ability to offer competitive American-facing cloud and internet services to global customers, crippling their remaining US businesses.
“They are our chief global adversary, and they are very sophisticated,” said Doug Madory, an internet routing expert at internet analysis firm Kentik. “I think [US regulators] would not feel like they were doing their job if they weren’t trying to shore up every risk.”
China Telecom, China Mobile and China Unicom have long been in Washington’s crosshairs. The Federal Communications Commission (FCC) denied China Mobile’s application to provide telephone service in 2019 and revoked China Telecom and China Unicom’s licenses to do the same in 2021 and 2022, respectively. In April, the FCC went further and barred the companies from providing broadband service. A spokesman for the FCC said the agency stands by its concerns.
One factor in the FCC’s decision was a 2020 report from other US government agencies that recommended revoking China Telecom’s license to provide US telephone service. It cited at least nine instances where China Telecom misrouted internet traffic through China, putting it at risk of being intercepted, manipulated or blocked from reaching its intended destination.
“China Telecom’s US operations… provide Chinese government-sponsored actors with openings to disrupt and misroute US data and communications traffic,” authorities said at the time.
China Telecom has previously denied the government’s allegations and told US agencies that routing problems are common and occur on all networks.
The telecoms company sought to reverse the FCC decision, but a US appeals court rejected its arguments, noting that the agencies presented “compelling evidence that the Chinese government may use Chinese information technology firms as vectors of espionage and sabotage.”
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