Chinese e-commerce giant Alibaba Group Holding has decided to wind down the U.S. operations of its cloud computing subsidiary Alibaba Cloud, which experts said is a move motivated by increasing political hostility to Chinese business in the U.S.
"This is a consequence of the China-U.S. trade tension. As the 'China threat' idea expands in the U.S., many companies will not put their data in the hands of Chinese companies," Li Yi, a senior research fellow at the Internet Research Center under the Shanghai Academy of Social Sciences, told the Global Times on Sunday.
According to a report by U.S. news site The Information, Alibaba decided to scale down its U.S. operations after struggling to raise its sales. It also feared that an aggressive expansion policy might provoke lobbying against it by competitors such as Amazon Web Services, exposing Alibaba to political retaliation.
Alibaba did not respond to requests for comment by the Global Times as of press time.
"Some developed countries take a jaundiced view of China, as so often happens when a rising country encounters established powers. Chinese companies may focus in friendly countries and regions along the Belt and Road initiative for expansion, as Huawei did before," said Li.
Alibaba Cloud, founded in 2009, is by far the largest cloud computing provider in China, with a market share of 45.5 percent in 2017, according to figures from research firm IDC China. It has beat strong domestic competitors such as Tencent or China Telecom, as well as established multinationals with a strong presence in China, such as Amazon and Microsoft.
The company pushed aggressively to expand in the U.S., the world's largest cloud market, building two data centers in the country, media reports said. But the reports noted that even as Alibaba grew to fourth place worldwide in 2018.
Alibaba is reported to be shifting its U.S. strategy and focusing on U.S. companies that need support for their China operations, building on the strength of its domestic e-commerce and video-on-demand business, The Information report said.
Li noted that Alibaba took too many risks but has now chosen a good time to change its strategy.
"The U.S. is a tough market, as it's the birth place of cloud computing, with the world's largest companies there," Li said.
"[Alibaba's founder] Jack Ma Yun probably did a mistake by meeting with U.S. President Donald Trump too early and making big promises, such as pledging to provide 1 million jobs in the U.S. "Trump and his advisors probably think that Alibaba makes a good target for reprisals, so Ma does well in cutting his losses," he said.
