Highlights from CAICT's Cloud Computing White Paper
Reflections on the state of the cloud in China, its links to the digital economy, and more
Last month the China Academy for Information and Communications Technology (CAICT), a Chinese think tank under the Ministry of Industry and Information Technology (MIIT), published the 2022 edition of their annual white paper on cloud computing.1
The paper covers a broad range of topics, from cloud adoption across different industries to cloud safety concerns. With this article, I aim to provide a general summary of some of the white paper’s key points. I’ve chosen to focus on areas that provide insight into China’s cloud computing industry and its effect on other parts of the country’s economy while skimming over sections that spend more time discussing abstract or strictly technical concepts.
This article’s structure often follows that of the white paper, which may be helpful if you wish to delve into the source material if a section piques your interest. (Unless stated otherwise, all information below is sourced from the white paper.)
The state of the cloud
In 2021, the global cloud market bounced back to surpass pre-Covid growth levels, according to a Gartner study cited in the report.2 Counting sales of Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) alone, the market rose from a 13.7% rate of growth in 2020 to 32.5% growth in 2021 (notably higher than 2019’s statistic of 20.9%), reaching an unprecedented total of USD 330.7 billion.
For additional context, a separate Gartner report from the same period also predicts a constant increase in the global cloud market:
Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)
China’s domestic market
The global cloud market’s upward trend was also reflected in China’s domestic market.
Chinese cloud computing as a whole was in a stage of fast development in 2021. The market scaled to 322.9 billion yuan, seeing a 54.4% rate of growth compared to 2020. The public cloud market continued to progress successfully, increasing 70.8% in scale to 218.1 billion yuan. This market shows promise to become the primary driver of growth for China’s cloud market in the years ahead. The private cloud also broke the 100-billion-yuan barrier, growing by 28.7% to a total of 104.8 billion.
Notably, IaaS sales made up the bulk of China’s public cloud market each year, with SaaS and PaaS sales trailing behind in that order. Last year IaaS and PaaS sales grew by 80.4% (totaling 161.47 billion CNY) and 90.7% (totaling 19.6 billion) respectively, while SaaS sales grew by 32.9% (totaling 37.04 billion), dipping from 2020’s growth level of 43.1%. However, despite SaaS’s slower rate of growth, CAICT predicts that future digitalization and policies related to enterprise cloud adoption will spur an increase in the growth rate of SaaS sales.3
As of 2021, China’s leading public IaaS providers were Alibaba Cloud, China Telecom’s Tianyi Cloud, Tencent Cloud, Huawei Cloud, and China Mobile’s mCloud.
For PaaS, Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu Cloud led the market in 2021.
The Chinese characteristics of China’s cloud market
The paper points out five “Chinese characteristics” that have resulted from the cloud’s central role in the digitalization of China’s industries and businesses:
1. China’s policies are leading to a greater depth of cloud adoption and use, and the development of standards has led to new technological applications.
In terms of policies, the paper points to several specific policies promoting in-depth enterprise cloud adoption and use:
The State Council’s Outline of the People’s Republic of China 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2035 and 14th Five-Year Plan for the Development of the Digital Economy, both published in 2021.4 Both documents point out that encouraging cloud adoption and use will promote the deeper fusion of digital technology and the real economy while also empowering traditional industries to transform and upgrade themselves.
A Guide for Implementing Enterprise Cloud Adoption and Use (2022), a document that the MIIT began drawing up earlier this year.
Initial work on the Guide for Implementing Enterprise Cloud Adoption and Use (2022) began in April, and the MIIT announcement of the Beijing-based conference to launch this work can give some insight into the value that China’s government places on cloud technology:
Cloud computing provides the foundation for the development of the new generation of technology, such as big data, blockchain, and artificial intelligence. It is a key technological base of the digital infrastructure, and it is accelerating the merging of each field of the economy and society at each step of the process. Adopting and using the cloud has also become an important point of penetration in conforming to developmental trends of the digital economy and accelerating the transformation toward industrial digitalization and the use of smart and networked technologies in the industrial space.
The Guide for Implementing Enterprise Cloud Adoption and Use (2022) will offer clear paths for cloud adoption for different stages, industries, and scopes. It will be beneficial for the high-quality advancement of the work of adopting and using the cloud in this new period. The guide will accelerate the in-depth fusion of the new generation of information technology and the real economy, and it will help all industries develop in harmony.
Standards for cloud computing as a whole are also growing more comprehensive due to this industry’s growing maturity. In addition, the paper mentions that standards are also being advanced on national, industrial, and organizational levels.
2. Clustered development in the east and less concentrated development in the west
China has three computing hotspots. Not by coincidence, they overlap neatly with the country’s most prosperous economic regions, located along the eastern coast. These regions are as follows:
Yangtze River Delta
Guangdong-Hong Kong-Macao Greater Bay Area
This is not to say that Central and Western China are strangers to cloud and data technology. The southwestern province of Guizhou, for instance, has developed a reputation as China’s “big data valley” in recent years. Central China also saw the greatest increase in cloud usage nationwide in the first quarter of 2021, followed by Western China.
In addition, China’s national “Eastern Data, Western Computing” project,5 which launched earlier this year, aims to build a comprehensive big data network with hubs spanning the entire country; the project focuses particularly on building up the west’s cloud and big data infrastructure due to the region’s sparser population and greater access to cheaper renewable energy.
3. As market demands continue to change, multiple modes of deployment develop alongside one another
Building on top of the foundational paradigms of public, private, and hybrid clouds, there are newer and more nuanced architectural models for cloud computing, namely distributed cloud, dedicated cloud, and hosted cloud architectures.
4. Different industries use the cloud in different ways, resulting in clear “tiers” of usage
The paper points out that various industries in China approach the cloud with different levels of skill and apply them with various degrees of depth.
First tier: In-depth use of cloud
At the top tier are internet and information services, which have essentially already applied cloud computing to their industries in a profound manner. Due to their existing familiarity with the IT field, they’ve merged new technologies like AI, big data, and blockchain with cloud-native technology, increasing these companies’ overall levels of business intelligence.
Second Tier: Increasing use of cloud
The next tier is reserved for the fields of finance, government administration, and communications, which have continued using cloud computing in greater depth over time.
The paper uses finance as an example of this second tier. Finance companies’ usage of cloud-native technology like containers, microservices, and middleware to migrate lower-level frameworks to the cloud, build efficient DevOps systems, and allow cloud-native applications to be rebuilt more efficiently.
Third Tier: Incomplete use of cloud
The third and lowest tier consists of the energy, medical, and industrial fields, whose usage of cloud technology leaves something to be desired, according to the white paper. These industries tend to apply cloud technology to non-core systems.
For instance, the medical industry’s migration to the cloud has primarily been applied to information and portal systems, archives, and medical service systems. This industry often makes use of dedicated and hybrid cloud architectures.
The energy industry, on the other hand, tends to be located in more secluded areas. With not enough use for distributed cloud, they still require a coordinated mix of cloud and edge computing.
The rise of the cloud native paradigm
The paper emphasizes the importance of the cloud native concept to China’s cloud development. As a quick summary, “cloud native” refers to a cloud-based, microservice-focused paradigm for building applications, often contrasted with traditional monolithic models. This paper mentions that cloud native can provide businesses with technical safeguards, particularly through leveraging core technologies such as containers and microservices, as well as serverless architectures and Infrastructure as Code (IaC).
From cloud services to computing services
As users’ requirements for computing power grow, cloud services are gradually evolving towards computing services. The paper defines computing services as follows:
Computing services refer to models that are based on diverse types of computing power, are connected through computing networks, use cloud computing technology to get a unified output from heterogeneous forms of computing, and combine technologies such as big data, artificial intelligence, and blockchain, packaging computing power, storage, and networking resources together and presented in the form of a service (such as an API).
The growth of computing services also promotes three concepts: the “ubiquitization,” democratization, and standardization of computing.
In addition, computing services present a different business model from cloud services:
Computing services are richer in terms of content, encompassing the whole of computing power available in the cloud.
Computing services provide services that are more comprehensive and user-centric.
The venues for computing services are more diverse, which provides advantageous conditions for traditional industries to transform and grow.
Computing services are constructing a new industrial chain that better suits the needs of economic development.
The paper also summarizes China’s current progress toward providing a stable ecosystem for computer services:
In recent years, China has made quick progress in various areas around critical computing technologies, including computer chips, server hardware, cloud native, cloud-edge cooperation, and computing network fusion. To respond to the market’s brand-new demands for computing services, a preliminary system for computing service technology has already taken shape.
The link between computing services and the digital economy
The development of a digital economy is an important priority for China, and the cloud plays a key role in this development. As discussed above, the 14th Five-Year Plan for the Development of the Digital Economy stressed the importance of cloud adoption and use. However, we can also examine China’s digital economy through the lens of computing services.
Computing services, the white paper states, have become a key metric for measuring the vigor of the digital economy.
According to CAICT, for every 1-point increase in the computing power development index, China’s GDP grows by about 129.3 billion CNY (approximately 1.3% of the national GDP). This pull on the GDP will multiply as the computing power development index increases. This brand-new economic form, which exerts pull on the digital economy through the development of computing power, has been called the computing economy. As an important component of the digital economy, the computing economy primarily uses data as its key factor of production and computing power as its core force of production and uses both aspects to advance the development of the digital economy.
This “computing economy” uses a two-pronged approach to boost the digital economy: it empowers traditional industries on their paths to deeper digitalization, and it also creates a new computing industry of its own.
In more concrete terms, computing services can revitalize society’s idle computing power and coordinate the development of the computing economy. Computing services can also speed up the industrial permeation of applications for computing power, enriching the computing economy’s industrial structure.
Looking toward the future
The final section of the white paper presents a list of expectations for the future of the cloud in China. These predictions also reflect current issues facing the cloud industry in China and elsewhere:
Cloud native frameworks and applications will become more widespread.
Systems for computing service technologies will be further perfected.
The stability of cloud-based systems will be further optimized.
Cloud security tools will become more convenient to use.
Cloud optimization and administration will grow more extensive.
Subscribe to Cloudology for free weekly insights into Chinese cloud & tech.
This section cites an unnamed Gartner study published in April 2022.
For readers interested in China’s SaaS market, check out this 2020 article from Lillian Li’s Chinese Characteristics newsletter: “Why are there no massive Chinese SaaS companies?”
Links to the original government documents: