How the Chinese Data Center Market is Evolving

China, home to more than 1.3 billion people, is the most populous nation in the world and a major contributor to global advancements in science and technology. Representing roughly one-quarter of the world’s online population today and projected to be nearly one-third within five years, China has also rapidly become an influential player in the global internet ecosystem. Most notably, the Chinese data center market is currently on the rise, so much so that research analyst firm Technavio predicts a Compound Annual Growth Rate (CAGR) of 13 percent over the next four years. As an increasing number of multinational and domestic enterprises turn to Cloud Services Providers (CSPs) and colocation solutions, the Chinese data center market must continue to evolve, providing the necessary space, power, redundancy and low latency to meet market demands.

End-user demand for data centers in China has now exceeded the available supply as organizations seek enhanced connectivity and scalable solutions for their growing businesses. When compared to the global market, very few of the nation’s data centers provide the space and power density necessary to support the needs of today’s technology-dependent organizations. Government investments, earmarked to stimulate China’s technology development, have led to an increase in the adoption of cloud-based services, Big Data analytics and the Internet of Things (IoT), while recent government reforms, including the establishment of free-trade in Shanghai, are attracting international investors. 

The growing demand for high-density, redundant facilities throughout China is precipitating a shift in the design and development of the country’s data centers. Thanks to emerging cloud technologies, outsourcing of IT infrastructure services has increasingly become commonplace, further fueling growth throughout the colocation industry. In an attempt to match global standards, facility developers are setting their sights on Shanghai and Beijing, as well as the major cities and increasingly understood markets of Tianjin, Nanjing, Hangzhou, Guangzhou and Shenzhen, which have major network hubs and where power, capacity and high-bandwidth connectivity is available.

Those looking to colocate in China have to do their homework before deciding on the appropriate data center provider. So, for the many international investors seeking a facility that is purpose-built to meet their individual needs, where do they begin?

Data center solution providers must first have a license to operate a data center facility in China as well as secure and reliable funding to complete the project. However, the market has many wider challenges: from land or building acquisition processes, to negotiating fiber and power agreements, to achieving international customer service standards, to state security compliance, and more.  Some providers exist at the cutting-edge of the market’s transformation, leveraging an experienced management team, operational IDC licenses, sites in key cities as well as secured funding. They do not compete with traditional colocation players, but instead are agents of change, providing solutions for customers looking to access the Chinese market while bypassing under-scaled, expensive and unsuitable solutions.

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