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    • Cloud Computing – The Bedrock of 21st Century IT Infrastructure
    • Article

    China’s Cloud Overshadows the World

    The Growth Story of a $20 Billion Growing Market

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    Highlights

    • Mainland China’s cloud infrastructure services expenditure grew 21% YoY to reach USD 7.3 billion in Q1 2022
    • China continues to be the global leader in cloud computing.
    • The overall market size of China’s public cloud services hit USD 19.38 billion in 2020 with 49.7% YoY growth, the highest worldwide.

    In this article

    The growth of cloud   inpage
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    The growth of cloud cloud market cloud on the rise China's Cloud Market

    The growth of cloud computing in China

    China continues to be the global leader in cloud computing

    Mainland China’s cloud infrastructure services expenditure grew 21% YoY to reach USD 7.3 billion in Q1 2022, according to research group Canalys. Cloud spending in the country was below expectations this quarter, given it stood at USD 3.9 billion in Q1 2020 and had been consistently increasing until now.

    The drop in spending can be attributed to the resurgence of COVID-19 in March 2022, which hampered the delivery of new and underway projects, lowering the overall revenue in the nation’s cloud infrastructure services market.

    However, China continues to be the global leader in cloud computing. The overall market size of China’s public cloud services hit USD 19.38 billion in 2020 with 49.7% YoY growth, the highest worldwide.

    Chinese cloud service providers Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu AI Cloud stay at the top and have immensely benefited from the expansion of cloud services and use, accounting for 79% of the total expenditure in the country, a 19% boost YoY.

    Chinese cloud providers are incessantly supported by their government as part of a “new infrastructure” plan to boost digital transformation. In May 2020, Beijing committed USD 1.4 trillion to tech platforms, which resembles China’s 2007 investments into high-speed rail and railroads to stimulate their economy in a crisis.
     

    The overall market size of China’s public cloud services hit USD 19.38 billion in 2020 with 49.7% YoY growth, the highest worldwide.

    China v/s US

    How China stands in contrast with the US public cloud market

    In 2020, China’s public cloud market stood at USD 19.38 billion, equivalent to 10.8% of the US in the same year. In the past half-decade, the compounded annual growth of China’s public cloud market has hit 61.1%, significantly higher than the US’ 23.8%. 

    Factors that cause differences in the cloud computing market between the US and China are as follows:

    • Prioritization of digitization - The lifespan of companies in the US (<7 years for SMEs and <40 years for large enterprises) is far greater than in China (2.5 years for SMEs and 7-8 years for group enterprises). To survive, Chinese companies need to invest in places where ROI is significant and immediate. Cloud computing technology isn’t one such investment.

    • Labor costs - Due to low labor costs in China, companies prefer to use a manual workforce instead of information technology to meet business needs.

    • Underlying information infrastructure  - Information infrastructure forms the backbone of digitization. The US invested heavily into IT in the 1980s and 1990s and popularised it. China, in contrast, is developing cloud computing and IT infrastructure alongside each other.

    White paper

    Artificial Workloads and Cloud Migration

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    White paper The growth of cloud computing in China

    Increasing Adoption of Public Cloud in China

    China’s public cloud market on the rise

    China’s public cloud market is expected to grow quickly to reflect the following factors:

    • Penetration of the digital economy in industries - The digital economic penetration rate of China’s primary, secondary and tertiary industries was 8.2%, 19.5%, and 37.8% in 2019, where only the primary industry penetration is slightly more than the global average. In the next few years, the proportion of the three sectors will stabilize with an increase in the service industry, with cloud computing as a playing factor.

    • “New infrastructure” plans - The “new infrastructure” plan uses cloud computing for resource management integration, technology deployment, network connection optimization, and flexible scheduling of computing capabilities. Per a five-year plan, China aimed to increase the proportion of the core digital economy’s value in its GDP to 10% in 2025 from 7.8% in 2020.

    • Exponential growth in data volume - IDC research predicted that China would generate 13.1 ZB of data in 2020, creating 21.4% of the total global data. By 2025, China’s data will grow at a CAGR of 24.4%, exceeding the annual global compound. Data needs computing and storage technologies to be of value.

    As per IDC, China’s public cloud market will amount to USD 65.95 billion by 2024.

    Numbers You Should Know

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    24.4%

    DATA VOLUME

    Expected CAGR growth in China’s data by 2025

    21%

    CLOUD COMPUTING

    Growth in China’s cloud infrastructure services expenditure in Q1 2022

    $65.95

    MARKET GROWTH

    Expected growth in billion in China’s public cloud market by 2024

    POINT OF VIEW

    Gain an edge with distributed cloud and edge computing

    Distributed cloud and edge computing is a winning combination as they enable real-time insights to create hyper-personalized customer experiences. 

    Increasing Adoption of Cloud Computing in China

    Cloud computing to diminate Chineese and world markets in the coming future

    CAICT predicts that by 2023, the cloud computing market in China will reach 375.42 billion yuan, an increase of 1.8 times since 2019 at a CAGR of 29.5%. This growth will not be hassle-free.

    Chinese companies have a variety of reasons to delay cloud migration, and the two most prominent, according to McKinsey, are:

    • The cost and disruption of migration as most companies lack advanced technology stacks and a standard virtualized or containerized workload.

    • The lack of security in underlying computing infrastructure distinguishes China from the US, where public cloud providers offer security solutions that are important for enterprises.

    It will be interesting to see how the cloud computing landscape takes shape in China and worldwide in the coming future.

    POINT OF VIEW

    Value Realization with Distributed Cloud and Edge Computing

    The need for a distributed cloud architecture for operational consistency

    Explore more insights

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