China’s state-owned conglomerate CITIC Group announced last week the establishment of a cloud and big data service subsidiary to fully capitalize on the ongoing internet boom in the country (link in Chinese). This marks CITIC’s shift in focus to internet-related businesses in line with the country’s “Internet Plus” policy.
The new firm, dubbed CITIC Industrial Cloud, is focused on platform development, operations, as well as pushing innovation and entrepreneurship, according to a company statement. Based on a market-oriented operation model, the subsidiary is expected to provide technical support and services to the group’s affiliated companies as well as other clients.
As a cloud service broker, the firm’s basic cloud infrastructure platform is a third-party service that acts as an intermediary between providers and purchasers of cloud computing services. The first batch of cloud service providers on the platform includes Alibaba Cloud, Tencent, Yongyou, Knownsec, China Entercom and CITIC Application Service Provider Co., Ltd.
CITIC Industrial Cloud also inked a partnership with AsiaInfo, a software and IT service provider to the telecom industry, and software company Global InfoTech for big data platform construction, software development, and information security.
To start the business, CITIC will first strengthen IT support to fully digitize the business of its subsidiaries and other customers. In addition to the cloud brokerage service, a series of infrastructure arms like a cloud platform for software development and big data will be established in the future. In the long run, the company aims to launch a project to encourage innovation and entrepreneurship among employees.
Update: (Based on an asset light model, the total investment in this project is expected to be around eight-digit RMB, introduced Zhu Gaoming. “We are developing an open platform to integrate all kinds of cloud services, like a super market for clouds, so it’s less capital demanding for infrastructure construction. We only have to cooperate with partners who have these resources.”
Through the construction of this industrial cloud, the company aims to integrate the cross-industry data that CITIC has accumulated from its wide range of businesses from financial services, energy, real estate and more.
“Currently, CITIC Industrial Cloud is positioned as a supporting project that brings the group’s offline businesses online and to inspire new business models. We are not expecting it to generate revenue in the short term. But with the full potential of cloud market, it’s highly possible the subsidiary may go public independently in the future”, said Zhu.”)
Jumping On The ‘Internet Plus’ Bandwagon
Fueled by the state’s “Internet Plus” policy, China’s internet craze is quickly taking hold of the whole country, from individual entrepreneurs to state-backed enterprises. China’s state-owned enterprises are holding a more open and active role in pushing internet and technology development, especially through startup ventures.
CITIC Guoan, which is backed by CITIC Group, has invested $20 million USD in NextVR, a virtual reality sports broadcasting startup. China Post Capital, the state-owned investment institution of postal service company China Post Group Corp, is an investor of Ant Financial. Insurance giant China Life Insurance has invested in both Didi Chuxing and Uber China.
Essentially monopolists, one of the greatest advantages of China’s SOEs is their access to resources and their presence in all traditional industries. For example, CITIC Group has a wide range of businesses that include financial services, resources and energy, manufacturing, engineering contracting, and real estate. While technology innovation is upending emerging as well as traditional industries, China’s SOEs are feeling the pressure from up-and-coming tech companies. Jumping onto the internet bandwagon to fully embrace change is perhaps a good option for them to keep up with the evolving market.
This post is updated on 14:47 September 8th to add more details to the story.