Cloud computing adoption accelerates in China as economy recovers from coronavirus pandemic

·3-min read

China’s cloud service spending soared amid the economic disruptions caused by Covid-19 and the strong growth will continue as the economy regains momentum in the post pandemic era, according to a report.

The country’s cloud infrastructure spending in the first quarter rose 67 per cent year on year to US$3.9 billion amid the coronavirus lockdowns, maintaining its No 2 position behind the US, according to data from Canalys.

China’s spending accounted for 12.5 per cent of the world total in the first quarter compared to 10 per cent a year ago as the country ratcheted up its cloud adoption rate as part of a digital transformation plan.

“New cloud migration and cloud-native opportunities are emerging as organizations assess their response to the crisis, optimise future emergency continuity plans and develop new processes and services,” Canalys chief analyst Matthew Ball said in the report.

“Additional funding through government-led ‘new-infrastructure’ economic stimulus measures into areas such as connectivity, health care, education, transport and urban areas will also drive cloud use over the next 12 months.”

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Cloud computing enables companies to buy, sell, lease or distribute a range of software and other digital resources as an on-demand service over the internet, just like electricity from a power grid. These resources are managed inside data centres.

While Amazon Web Services (AWS) and Microsoft Corp are the top cloud computing service providers worldwide, the market in China is dominated by the cloud business units of Alibaba, Huawei and Tencent. In the first quarter, Alibaba Cloud held 44.5 per cent market share, while Huawei Cloud and Tencent Cloud accounted for 14.1 per cent and 13.9 per cent of the market respectively, according to the Canalys report.

In May, Tencent Cloud unveiled plans to invest 500 billion yuan (US$70 billion) in digital infrastructure to expand its cloud computing, AI, blockchain and cybersecurity capabilities over the next five years.

Alibaba Cloud announced earlier this month it would hire 5,000 technical people in areas including networks, databases, servers, chips and AI after the company said in April it would invest 200 billion yuan over the next three years on its cloud infrastructure to help speed up the digital transformation of businesses in China.

“China’s stimulus measures differ from those in the rest of the world by focusing investment on 5G, AI, cloud computing, electric vehicles, IoT and robotics to restructure the economy and drive growth through innovation,” the Canalys report said. “These opportunities will further intensify competition among the leading cloud service providers.”

Boosted by Chinese government stimulus measures, cloud computing is gaining momentum as the economy gradually recovers from the impact of the pandemic. At last month’s National People’s Congress meetings, Premier Li Keqiang highlighted the role of digital infrastructure to accelerate economic restructuring.

Global cloud infrastructure services spending grew 34 per cent year on year to a record US$31 billion in the first quarter, driven by organisations around the world moving to remote working amid lockdowns imposed to limit the spread of Covid-19, according to an April report from Canalys.

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