The Biden administration is currently scrutinizing China Mobile, China Telecom and China Unicom due to concerns over the possible misuse of American data, as per insider information.

What Happened: The Commerce Department is spearheading the investigation into these state-backed corporations. The undisclosed probe is focused on the potential exploitation of U.S. data by these firms through their cloud and internet businesses and the possibility of this data being handed over to Beijing, Reuters reported on Tuesday.

Despite a limited presence in the U.S., these companies still have access to American data as they provide cloud services and route wholesale U.S. internet traffic. This access persists even after telecom regulators prohibited them from providing telephone and retail internet services in the U.S.

The investigation is part of broader efforts by Washington to prevent Beijing from leveraging Chinese firms’ access to U.S. data, which could potentially harm companies, Americans, or national security. This action signifies the administration’s intent to close all remaining avenues for Chinese companies already targeted by Washington to acquire U.S. data.

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Regulators have yet to determine how to address the potential threat. However, they could block transactions allowing these firms to operate in data centers and route data for internet providers, which could impact the Chinese firms’ ability to offer competitive American-facing cloud and internet services to global customers.

The Chinese Embassy in Washington expressed hope that the U.S. would “stop suppressing Chinese companies under false pretexts.”

Why It Matters: This investigation comes at a time when the U.S. is increasing its crackdown on Chinese firms as part of its anti-China policy. Many Chinese firms have opted to set up U.S.-domiciled businesses to avoid increased restrictions.

In June, U.S. tech giants, including Google and OpenAI, tightened employee screening due to rising fears of Chinese espionage. Furthermore, TikTok and its China-based parent company ByteDance Ltd. have been under scrutiny, with the U.S. considering banning the app due to national security concerns.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari