This plan arose from China’s need to respond to the overabundance of data centers built without coordination, which ended up creating an imbalance between the supply and demand of computing capacity in the country. The Chinese government’s idea is to invest in a more unified and strategic model, transforming the excess networks into a single one, which optimizes resources and provides a global competitive advantage in the technology sector.
China wants to create a national state cloud
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.
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.
National network viability impacted by technical issues
Despite the government’s initial enthusiasm for the national computing network project, experts and public policy advisors warn that the path to a functional network like this will be quite challenging. This is because efficient transfer is still limited by latency between distant data centers.
Industry sources and Chinese policy advisers said the formation of a computing power network will not be easy, given that the technology for data centers to efficiently transfer the power to users in real-time remains underdeveloped. When the Chinese government rolled out the Eastern Data, Western Computing project, it targeted a maximum latency of 20 milliseconds by 2025, a threshold necessary for real-time applications such as high-frequency trading and financial services.
However, many facilities, especially those built in the remote western regions, still have not achieved this standard, the project manager said. Many of the centres also use different chips from Nvidia NVDA.O and local alternatives such as Huawei’s HWT.UL Ascend chips, making it difficult to integrate various AI chips with different hardware and software architectures to create a unified cloud service. Chen, however, was optimistic, describing a vision of the cloud bridging the differences in underlying computing power and the physical infrastructure.
With data centers operating with a variety of chips, standardizing technological infrastructure is a challenge. This vast diversity complicates the creation of a unified cloud service. Still, authorities seem confident that these barriers will be overcome with innovation and collaboration among the sector’s key players, led by state-owned telecommunications giants.
Seeking technology sovereignty through cloud computing
The computing network could be a key component for China in its race for global technological leadership. If it can resolve its infrastructure overhang, the country could strengthen its position against the United States in the race for advances in artificial intelligence and cloud services.