New research from Canalys showed that China spent $2.1 billion more in Q1 2021 than it did in Q1 2020

In the wake of the increase in digital services brought on by the coronavirus pandemic, cloud service providers around the world are investing heavily to increase their capacity. In China, this is especially notable, with new research from Canalys showing that China spent around $6 billion on cloud infrastructure services in Q1 2021, an increase of 55% on the previous year.

This growth is outpacing that of the rest of the world, fuelled by supportive policies from the Chinese government, as well as a rapidly growing and increasingly digital economy. 

“Digital services, including everything from digital payments and content to customer and social engagement and remote learning, are key drivers behind the demand for cloud infrastructure services in China,” said Canalys analyst Blake Murray. 

Perhaps most noticeable here – and yet hardly surprising – is the dominance of domestic tech giants in China’s cloud market, with Alibaba, Huawei, Tencent, and Baidu accounting for over 80% of the infrastructure service spend in Q1.

“Now they are investing heavily to increase their capacity, develop cloud-based databases, storage and compute capabilities to replace on-premises IT infrastructure, enable a broad developer ecosystem for cloud-native development, and extend cloud and AI to all industries,” said Murray

However, that is not to say that overseas businesses are not hungry to take a bite out of this booming market. Microsoft, for example, recently announced that it will build four additional data centres in China as early as 2022 to help cope with the soaring demand.

China was the largest cloud market in the world after the US, accounting for 14% of global investment in Q1 2021, up from 12% in Q1 2020. 

But despite this record growth, the Chinese market cannot satisfy China’s domestic cloud service providers forever, and Canalys suggests that they will soon be looking to export their services abroad. This will see them truly enter into direct competition with the giant US platforms like Microsoft Azure, Amazon Web Services, and Google Cloud, as well as tackling the various data sovereignty laws and highly specific industry needs. 

Success is far from guaranteed and, as is so often the case, it seems likely that we will see the clash of Chinese and US cloud services primarily in developing markets, such as Africa, in the coming years. 


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