China’s public cloud market growth double global average in 2018: report

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China’s public cloud services market continued to grow at a rapid pace in 2018, according to a report released Wednesday, as tech giants like Alibaba and Tencent ramp up their cloud business to serve increasing demand from the domestic market.

According to market intelligence firm IDC, China’s infrastructure-as-a-service (IaaS) public cloud market grew 86.1% year on year to $4.65 billion, accounting for nearly 13% of the global market.

Why it matters: China is the world’s second-largest public cloud IaaS market, behind only the US. Demand in China has been on the rise over the past five years thanks to the internet industry’s explosive growth as well as policy support.

  • Cloud computing has emerged as a new battleground for Chinese tech giants. The market is currently dominated by e-commerce firm Alibaba, but other players are catching up.
  • Foreign service providers like Amazon and Microsoft are eyeing China’s lucrative market, but their expansion efforts have largely been restricted by local regulations.

Details: The report shows that four Chinese cloud services providers—e-commerce firm Alibaba, WeChat owner Tencent, state-owned China Telecom, ‎and software company Kingsoft Cloud—have ranked among the top 10 global IaaS providers by market share. In 2014, Alibaba was the only Chinese cloud provider on the list.

  • IaaS is one of three main forms of cloud services, which provides resources like computing, storage, and networking power over the internet. The other two segments are platforms-as-a-service (PaaS) and software-as-a-service (SaaS).
  • The IaaS market in China grew at a pace much faster than the global average, which rose 45% year on year.
  • Analysts expect China’s IaaS market growth will continue to outpace global market growth for the next five years. Domestic providers should ramp up research and development as competition in China and abroad heats up.

Context: Although China’s public cloud market has grown explosively over the past few years, it is still nascent compared with more mature markets like the US, Japan, and Singapore. However, the country will likely continue to ramp up spending into core technology and IT infrastructure development.

  • China’s SaaS market is experiencing rapid growth, though it is still at its early stage and fragmented. The China market was projected to reach RMB 23.21 billion (around $33.7 billion) in 2018.
  • Much like IaaS and SaaS, China’s PaaS market is also experiencing explosive growth, according to IDC, but is still very small, approximately RMB 5.4 billion (around $790 million) in 2017.
  • China’s spending on public and private cloud is increasing at a rate twice that of the global market, according to IDC’s previous report.
  • Cloud computing is part of the country’s Made in China 2025 initiative that aims to upgrade the traditional manufacturing base through high-tech development.