I think that the reasoning is: they trust the git company (whatever it is) not to sell their code. They are worried that their code goes into a model and somebody else could ask the model "write a service like XYZ" and it will regurgitate their code.
GitLab even has a free self-hosted version, and it has a number of advantages (like being able to actually have a structure with inherited secrets and accesses, and no, GitHub Organisations do not count and suck). And for years thanks to GitLab-CI it was clearly ahead.
In terms of WHAT you need to be concerned about, it seems it goes far beyond code, and far beyond having to trust your model provider.
A coding agent with access to a bash tool is going to have access to anything that a human with a bash prompt would, and even if you try to provide a nailed down sandbox environment for the agent, you still need to be concerned about things like unencrypted passwords and keys that it may be able to find "laying around" in code or databases/etc it has access to.
I'm surprised there haven't yet been more widely disseminated stories about coding agents and claw-bots wreaking havoc.
When these tools first appeared the overwhelming conversation was about the risk of letting a remote tool siphon your code and intellectual property (where eventually they're going to add that to their training). Now everyone is using them, and that fear seems to have dissolved. Every corporation is sprinkled with Claude Code, Antigravity, Copilot, Codex, and so on. Even the long fear-mongered Chinese providers are being heavily used in many spaces.
In this case this is a PR battle between two firms, and it isn't much more. And Alibaba isn't worried about the "proprietary code" (the truth is that there is incredibly little interest in most orgs code), but that the tool is a backdoor, or at least that is the claim.
I think from a commercial perspective yes, but access to source code is very good for finding exploits which could be very valuable for governments. I could also see a future where companies are directly cyber-attacking competitors in hostile markets too...
Until the first big incident, yes.