The latest action reflects the administration’s ongoing approach to regulating Chinese companies that access sensitive data for business operations in the US.
The US has launched investigations into China Mobile, China Telecom, and China Unicom amid concerns that these firms could misuse their access to US data, according to a Reuters report.
The country’s Commerce Department has completed “risk-based analyses” on state-backed Chinese enterprises China Mobile and China Telecom, and issued subpoenas, according to the report. The investigation into China Unicom is reportedly less advanced.
The three Chinese companies have been under the US authority’s scrutiny for quite a while now. In 2019, the Federal Communications Commission (FCC) rejected China Mobile’s application to offer telephone services.
Subsequently, the licenses of China Telecom and China Unicom for similar services were revoked in 2021 and 2022, respectively. Additionally, the FCC extended these restrictions by prohibiting the companies from providing broadband services.
In 2021, the New York Stock Exchange delisted China Mobile, China Unicom, and China Telecom in compliance with an executive order issued by the Trump administration. This order prohibited US citizens from investing in companies linked to the Chinese military.
Potential impact on enterprises
Despite the existing restrictions, China Mobile, China Telecom, and China Unicom maintain a modest presence in the US, offering cloud services and managing the routing of wholesale US internet traffic, according to Reuters.
Analysts point out that further efforts to block them could disrupt critical services for US enterprises.
“The crackdown on Chinese telecom firms may impact the efficiency of US enterprises’ data management and global connectivity by limiting competitive options and increasing transition costs,” said Prabhu Ram, head of the Industry Intelligence Group at CyberMedia Research. “Enterprises must prioritize thorough due diligence, robust contractual agreements, and strict compliance with data protection regulations to mitigate potential data security risks. Enterprises should also consider diversifying their suppliers and adapting their compliance strategies to effectively navigate the escalating US-China tech tensions.”
Tightening controls
The US government has intensified efforts in recent years to limit China’s access to data and technology, citing security concerns. Earlier this year, the US Department of Defense unveiled a fresh list of Chinese companies, which it alleged to have ties to the country’s military.
The latest actions may be seen as a clear indication that the current US administration will persist in creating hurdles for Chinese companies that access sensitive data to conduct business in the US, either directly or indirectly.
“While the current and additional proposed controls by regulators may cause some customers of these services to lose access, it is the right path to attempt to shore up networks and reduce potential risks,” said Daniel Newman, chief analyst at Futurum Research. “And while the unfortunate circumstances of such regulation may leave companies operating in good faith in a difficult situation, the US has to make decisions based on what it sees as the greater good – which at this point has to be de-risking as much as possible as US-China tensions remain high and will likely stay elevated for the foreseeable future.”
