China’s cloud market to explode by 2020, foreign players warned that what’s successful elsewhere doesn’t guarantee success in China

Changing regulatory and legal frameworks are opening up China to an exponential growth around cloud computing technologies.

The cloud computing sector in China is posed for an exponential growth in the coming years topping $20bn in market valuation by the end of this decade.

This represents a compound annual growth rate (CAGR) of nearly 40% in a market that was worth $1.5bn in 2013, according to research by Bain & Company and published by the International Trade Administration of the U.S. Department of Commerce (DoC) in its “2016 Top Markets Report – Cloud Computing”.

The Chinese government has in the last couple of years set out its long-term plans to expand the country’s digital infrastructure and its citizens and businesses reach to technology.

In the DoC report, the body said: “The government views cloud computing as a strategic priority and included it in the nation’s 12th Five-Year Plan.

“The Ministry of Industry and Information Technology and the National Development and Reform Commission (NDRC) subsequently launched pilot cloud schemes in five cities: Beijing, Shanghai, Shenzhen, Hangzhou and Wuxi.

“China’s development blueprint for the next five years, the 13th Five-Year Plan (2016 – 2020), will likely reaffirm the strategic priority of cloud computing, with the NDRC planning continued investment through 2020.”

Recently speaking at Datacloud Asia 2017 in Singapore, Wing-Dar Ker, president of one of China’s largest cloud providers 21Vianet Blue Cloud, spoke on the growing cloud industry in China.

He said: “Internet companies in China are investing billions into their own cloud businesses in coming years, seeking to take advantage of a market with 680 million Internet users.

“Cloud computing is a strategic priority for the Chinese government, which has piloted cloud schemes in a few cities, will only drive the growth of data centres further.”

In addition, while domestic companies are rapidly creating their own cloud services, Wing said there remains plenty of opportunity in the market for foreign players, especially foreign companies that seek local partnerships to help navigate Chinese regulations as well as share market expertise.

He stresses that domestic competition may be advancing, but foreign cloud computing companies still hold the key when it comes to technology.

Wing also noted that there is a shifting regulatory landscape as the government continues to assess what it deems to be the best way to regulate the sector.

He told the audience that as with many other sectors, foreign companies must be aware that just because one product is successful in other markets, that does not guarantee success in China.

“There are also perceived security and privacy concerns. Competition is fierce as technology continues to evolve and has not matured.

“Entering China without an experienced local partner could be detrimental to operations, let alone market penetration.”