July 24 (Reuters), Reporting by Reuters staff; Editing by Muralikumar Anantharaman
China is experiencing an uncontrolled growth of data centers, and the country is now seeking strategic measures to address this problem. Despite promoting a digital infrastructure network, the concern is that this will exceed the sector’s financial capacity. The creation of a state-owned cloud to optimize this computing power is one of the country’s plans, as it vies for technological dominance with the US.
China’s new focus in on the state-owned network
China is taking steps to build a network to sell computing power and curb the unwieldy growth of data centres after thousands of local government-backed centres that sprouted in the country caused a capacity glut and threatened their viability. The state planner is conducting a nationwide assessment of the sector after a three-year data centre building boom, according to two sources familiar with the matter and a document seen by Reuters.
Beijing is also seeking to set up a national, state-run cloud service for harnessing surplus computing power, according to Chinese government policy advisers. The Ministry of Industry and Information Technology (MIIT) is collaborating with China’s three state telecoms companies on ways to connect the data centres in a network to create a platform that can sell the computing power, they said. Computing power is a crucial element in the race for technological supremacy between China and the U.S. Besides being an embarrassment for Beijing, unused computing power and financially shaky data centres could hinder China’s ambitions in the development of artificial intelligence capabilities. “Everything will be handed over to our cloud to perform unified organisation, orchestration, and scheduling capabilities,” Chen Yili, deputy chief engineer at the China Academy of Information and Communications Technology, a think tank affiliated to the industry ministry, told an industry conference in Beijing last month.
Chen did not specify details of the cloud service proposal, but his presentation materials showed China was targeting standardised interconnection of public computing power nationwide by 2028, even as some analysts were skeptical about the plan given the technological challenges it posed. China Mobile 600941.SS, China Unicom 0762.HK and China Telecom 601728.SS, the state-run telecoms companies, and MIIT did not respond to requests for comment. The sources did not want to be identified because of the sensitivities of the issue.
Reorganization of digital infrastructure
Following the recent surge in state investment, China is seeking to ensure the long-term viability of its existing infrastructure. The proposal for a centralized network emerges as a solution capable of strategically redistributing computing power with economic efficiency. This will allow more regions of the country to be supplied without the need for further construction.
China’s data centre building boom kickstarted in 2022 after Beijing launched an ambitious infrastructure project called “Eastern Data, Western Computing”, aimed at coordinating data centre construction by concentrating facilities in western regions – where energy costs are cheaper – to meet demand from the eastern economic hubs. Chen said at the June event that the industry ministry has so far licensed at least 7,000 computing centres. A Reuters review of government procurement documents for data centres used in computing shows a surge last year in state investment, totalling 24.7 billion yuan ($3.4 billion), compared to over 2.4 billion yuan in 2023.
Thanks to the significant increase in investment, particularly in the Xinjiang region, China’s challenge now is to reorganize its system and integrate its more than 7,000 licenses so that this national computing network is functional and consistent with the project’s growth objectives.
What can we expect from this project?
China’s move to transform its excess networks into a strategic powerhouse could set it apart on the international stage, especially in its battle with the US for digital prominence. Perhaps, before long, we’ll see China leading the charge in Artificial Intelligence, if it can overcome the potential operation challenges of this project.