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US companies have done the same, although only as test dummies and it wouldn‘t surprise me if the same is true here and the vast majority of sever capacity remains above sea level. Chinese tech companies tend to overdramatize things because they know nobody reads up on fact checkers later. This is really just this week‘s „China is 50 years in the future!“ fluff story.
Sounds like a possible violation of EU rights. Similar practices have cost other governments dearly in the past.