Chinese internet giant Tencent announced Tuesday it will invest RMB 500 billion (around $69.9 billion) into cloud computing and other technologies over the next five years.
Why it matters: While the Shenzhen-based company said the investment plan is a response to Beijing’s call for investment in so-called “new infrastructure,” it is also strikingly similar to a plan announced by e-commerce giant Alibaba last month.
- Tencent, best known for its instant-messaging app Wechat and mobile games, has in recent years been actively investing in cloud services in search of growth, opening another avenue of competition with Alibaba, China’s biggest cloud-computing service operator.
- The company’s revenue from its fintech and business services segment, which includes cloud computing and consumer loan services, grew 22% year on year to RMB 26.5 billion in the first three months of this year, accounting for nearly one-quarter of its total revenue.
- China is pushing for a technology-driven structural upgrade of its economy with new infrastructure investment projects, which include a wide range of sectors from the next-generation 5G network, artificial intelligence (AI), and data centers.
- Analysts estimated China’s total investment into new infrastructure projects will reach RMB 1 trillion in 2020.
Details: Key sectors of Tencent’s investment plan include cloud computing, AI, blockchain, data centers, supercomputer, and cybersecurity, Dowson Tong, Tencent’s executive vice president, told reporters Tuesday.
- Tencent will build across the country several data centers, each containing more than 1 million servers, Tong said.
Context: Tencent’s announcement came days after Chinese Premier Li Keqiang called for investment in new infrastructure during his government work report speech at the opening of the National People’s Congress on Friday.
- Chinese e-commerce giant Alibaba said last month it would spend RMB 200 billion on cloud computing and data centers.
- Alibaba and Tencent are the two biggest cloud service providers in China. Alibaba reigns supreme with 46.3% share of the market with Tencent holding 18% as of the fourth quarter of 2019, according to market research firm Canalys.