The state of the cloud in China (2024)
China is one of the world's biggest economies – so how is its cloud market faring? Learn about its home and overseas markets in our 5-minute read.
Back in 2006, Amazon launched AWS as the first public cloud service. It was a time when "cloud computing" still had a futuristic air. Today, it's the engine room of the internet and a ubiquitous feature of our lives at work, at home and on the move.
"The internet" is no longer something that can be tidily separated from our lives. Where once we logged on and off, now the majority of us are permanently online, whether we're checking our devices or not.
Global business is unthinkable without cloud computing. It's as fundamental to the running of systems, software and devices as water, gas and electricity.
Is it any surprise, then, that the world's biggest nations are investing heavily in the cloud?
China is one of the biggest global players in the cloud market. But despite its overall growth, the picture for 2024 is mixed. The domestic market is sluggish and cloud providers are looking overseas to boost profits. Meanwhile, the ongoing trade war with the USA is limiting growth.
The big picture
So far, China's adoption of cloud technologies is inextricably tied up with its consumer market. Like elsewhere, online retail is a big deal in China. Retailers need to know that they have the computing resources to respond to spikes in customer demand.
Take Singles' Day. Each November 11, single people are encouraged to treat themselves to gifts. On this day, online traffic can go into overdrive. The growth of data centres in China has partly been in response to this trend.
It's not certain, however, that retailers will continue to lead the way in the expansion of China's cloud market. Some say the next wave of cloud migration could occur in China's industrial and manufacturing sectors.
Key statistics
There are two sides to the cloud coin. One is physical infrastructure. The other is investment in cloud services.
In 2023, China had 448 data centres. This ranked them behind the UK (517), Germany (522) and global leaders the USA (5,375). It's important to note, however, that these statistics don't take into account the
size of the data centres in each country.
In the third quarter of 2023, China spent $9.2 billion (€8.48 billion) on cloud infrastructure. That's over a tenth of the world's spending on the cloud. Seventy-three percent of the market is occupied by three cloud vendors: Alibaba (known outside China mainly as a low-cost eCommerce store), Huawei and Tencent.
Alibaba Cloud has 39% of the market share, Huawei Cloud has 19% and Tencent Cloud, 15%.
But what do these statistics mean for the future of the cloud in China? The picture isn't all rosy.
Is the future of the cloud in China overseas?
Despite China's growth spurts, domestic margins are
dwindling. A combination of a saturated home market, sluggish growth and the US-China trade war are all contributing to this droopy state of affairs.
In response to this, the three main cloud vendors are looking for investment opportunities overseas. In particular, they've set their sights on Southeast Asia and the Middle East – areas where US giants Microsoft and Amazon are less prevalent.
In 2022, for instance, four data centres were built in Singapore. Two contracts were awarded to Chinese-backed companies, while two were given to US-backed companies. This shows both China's desire to expand overseas and its uneasy balancing act with the USA.
To see this overseas investment in action, let's turn our gaze to Saudi Arabia.
The Chinese cloud in Saudi Arabia
In September 2023, Huawei opened up a new cloud service centre in Saudi Arabia. The company's president of marketing and sales described it as "our focus in serving the Middle East, Central Asia and Africa". In the same year, Tencent Cloud partnered with Saudi Arabia's telecoms service Mobily.
Conflict with the USA
When talking about China's cloud market, it's impossible not to consider the effect of the ongoing US-China trade war. This began in early 2018 when Donald Trump began setting tariffs and other trade barriers on China. Biden inherited these measures and has so far left them in place.
One example of this would be the restrictions placed on China getting US microchips. Similarly, Biden floated the idea in the summer of 2023 of getting US cloud service providers to seek government approval before providing Chinese companies with AI cloud services.
Taken globally, cloud provision is
political. In the words of Trey Herr, director of the Atlantic Council's Cyber Statecraft Initiative under the Digital Forensic Research Lab (DFRLab):
"Cloud computing was political from the beginning… and it will be political at the end."
This is largely because of the physical nature of cloud resources. He goes on: "It requires a tremendous amount of physical infrastructure and all of that infrastructure has to sit somewhere. So there are the local politics of the jurisdiction it lives in."
Despite this ongoing conflict, China remains ambitious in its cloud market aims.
What's next for China?
These factors notwithstanding, 2023 saw a boosted global presence for Chinese cloud providers thanks to the frantic hype around generative AI – and in October of that year, the government announced it would double its cloud computing market by
2025.
An announcement isn't a prediction, of course – and governments worldwide are prone to declaring that growth will happen come what may. But given China's rapid economic expansion, this 100% increase may not be too wide of the mark.
Conclusion
China is a global player in the cloud market. However, its prospects are mixed thanks to a combination of slow growth at home and restrictions on trade abroad. Whatever else happens, it seems likely that providers will continue to look overseas, as well as at home, to invest and expand.
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