Future of Data Centers in China is going West

In terms of spatial distribution, existing data centers are primarily concentrated in Tier I cities such as Beijing, Shanghai, Guangzhou, and other economically developed areas where broadband networks, electricity, transportation, vertical support, and other fundamental conditions are more favorable for data center operation. However, due to scarce land resources and power supply, the central government is starting to restrict new data center construction in Tier I cities. More companies are therefore inclined to build data centers in Tier II, Tier III cities or western China due to favorable conditions such as abundant power supply, lower land cost, and suitable climate.

China is one of the biggest economies in the world and also has the biggest Internet user base globally. There is a huge need to store and process mobile Internet content including information, images, music, videos, and games. According to the latest data from the China Internet Network Information Center (CNNIC), China had 649 million Internet users at of the end of 2014, with more than 557 million using mobile phones to surf the Internet.

This exponential rise in the consumption of online media in China, that is, online videos, games, and social networking services, has generated massive demand for bandwidth, data storage, and other Internet resources. inducing enormous demand for Data Centers

As indicated in the 12th Five-Year Plan, the central government has a focus on developing the cloud computing industry. Many local governments such as those of Chongqing, Chengdu, Tianjin, Hohhot, Guizhou, and Shanghai are actively fostering the growth of the local cloud industry. Initiatives include tax incentives or the provision of dedicated industrial land for data center use, and collaborations with local or global service providers to build more data centers in the region.

Besides offering favorable initiatives to attract data center investment, the government also makes sizable investments to build or outsource data centers as part of its efforts to establish an efficient eGovernment system under the Smart City scheme. The central government highlights this in official documents to encourage government bodies to minimize in-house data center constructions, and instead leverage on third-party data center services or cloud services.

From 2013, it was noted that there are several sizable data center investments occurring in metropolises in west or northwest China such as Xi’an (Shaanxi province), Hohhot (Inner Mongolia), Zhengzhou (Henan province), Lanzhou (Gansu province), Zhongwei (Ningxia Hui Autonomous Region), and other Tier III cities in Shaanxi province.

According to the latest report from the Ministry of Industry and Information Technology (MIIT) of the People’s Republic of China (PRC), more than 50% of the large, newly-built data centers are located in western areas, strengthening the government’s Western Development Strategy that aims to invigorate the economies of the western provinces from 2000. To facilitate development and improve the quality of connectivity in these areas, the central government is also investing heavily in building direct backbone network nodes, with expected investments continuing for the next few years.

Vendors are also using cutting-edge technologies to improve the energy efficiency of their data centers. For example, global data center services provider Telehouse was an early adopter of the hybrid cooling system, with chillers and free cooling (cold air outdoor) working together to lower the power usage effectiveness (PUE) significantly at its Beijing BDA data center site. By introducing green measures, such as power and cooling, lighting, and DCIM, into data center components, data centers can reduce cooling expenses by up to 20%.


Sapan Agarwal | sapan.agarwal@frost.com | +603 6204 5830

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