China, a country with a population of nearly 1.4 billion people, is a data center market that continues to be largely untapped by international operators and global hyperscale technology and cloud services companies.
Most people are all too aware of the emergence of China, in recent years, as the second-largest, and potentially the future largest, national economy in the world. The gap between the United States and China is still significant, based on 2018 figures ($20.5 trillion versus $13.0 trillion), but China represents a huge market that cannot be ignored. The country has a 14% share in the world economy, compared to the United States’ 22%. Chinese GDP growth has continued at just under 7% in 2018 and shows few signs of abating, despite Trade War challenges and wider commentary.
There are both opportunities and challenges surrounding new data center builds and investments in China, and, at Chayora, we’ve established our business to address them.
There are two notable ancient Chinese proverbs that can aptly describe Chayora’s position in the data center industry in China, an online market that is larger and growing faster than any other in the world. These are: “Dig the well before you are thirsty” and “If you want one year of prosperity, grow grain. If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people.”
Today, over 800 million people in China have Internet access: 829 million as of December 2018, and this number is increasing with first-time users coming online numbering more than the adult population of the UK every year: an increase of 56.5 million in the last year! Internet penetration is now 59.6% (with nearly 75% in urban areas) against 90%+ in the West, and expectations are that over 1 billion in China will be online within the next Five-Year Plan. It is an enormous market at over 20% of the world’s online community today.
Whilst GDP per capita nationally is below Western markets at US $10k per person, online activity in the more prosperous densely urbanized and huge regions of the Beijing / Hebei / Tianjin area in the north (150m population); Shanghai / Jiangsu / Zhejiang in the east (200m population); and Guangzhou / Shenzhen / greater Bay Area in the south (180m population) is increasing fast with far higher average earning and associated spending patterns of consumers making the potential highly compelling.
However, in terms of accessing the Chinese population for online services, the challenge is wholly different to any other major market. This is because the national firewall in the country is highly effective, which means that businesses wanting to participate in the huge and growing online markets of China have to have servers present inside the firewall within mainland China. This contrasts with any other major market, where servers can essentially be anywhere in the world and access is enabled across the web.