Why does China want to build a national data center system? TechNode
In mid-February, China launched a new national project: the construction of a centralized data center system in eight Chinese regions (in Chinese). This is the “East to West Computing Capacity Diversion Project”, reflecting the shift of computing and data processing infrastructure from the eastern regions of the country to its western regions.
The diversionary project plans to channel the growing demand for computing and data analytics in the prosperous but land-poor eastern regions to the less developed but scarce and resource-rich western regions.
According to the government’s announcement in February, the project will set up eight IT hubs and 10 data center clusters. The plan is to build an integrated data center system by 2025. Each hub will connect to one or two nearby data center clusters. The hubs in the west will cater to offline data needs or needs requiring less internet connection, and the hubs in the northern and eastern regions will cater to the more advanced needs of neighboring megacities like Beijing, Shanghai, and Guangzhou. The eight hubs will be located in Beijing-Tianjin-Hebei, Inner Mongolia, Yangtze River Delta (Shanghai and neighboring provinces), Guangdong-Hong Kong-Macao Greater Bay Area, Chengdu-Chongqing, Guizhou, Gansu and Ningxia.
This is not China’s first attempt to redistribute key resources through a grand plan that involves large up-front investments in infrastructure. But it’s the first one that’s all about data and computing power.
In the first decade of the 2000s, the country successively launched three projects to redistribute natural gas, electricity and water from one Chinese region to another to ensure economic growth: the “West-to- East Gas Transmission Project”, the “West-to-East Gas Transmission Project”, the “West-to-East Gas Transmission Project”. East Power Transmission and Conversion Projects” and the “South-to-North Water Diversion Project”. The logic was to pool resources and demand to make better use of limited resources, like sending water from the wet south to the dry north, and channeling gas and electricity from the resource-rich west. to the populated east.
The data center project was built on the political foundations established over the past three years. The Communist Party first elevated data as a key economic factor (as important as land, labor, capital, knowledge and technology) at the 19th Fourth Plenary Session in 2019. In December 2020, China’s top economic planner, the National Development and Reform Commission, has issued a key policy guideline for establishing a system of “National Integrated Big Data Centers” (in Chinese). Last March, the government focused on the main long-term planning document, the 14th five-year plan. The five-year plan called for the country to develop a data services industry and establish uniform standards in the industry.
Who are the key players?
The industrial supply chain of a data center consists of three main sections. First, the upstream section: the infrastructure providers who build the data center structures and supply the electricity. The middle section is made up of commercial operators who manage the data centers. It is a mixture of public telecommunications operators, private cloud service companies and third-party Internet data center service providers. Finally, the downstream section is made up of end users: businesses and government agencies that need systematic data management.
According to a February report (in Chinese) by China’s Internet watchdog, the Cyberspace Administration of China (CAC), the main players who took part in the project are the two public telecommunications providers – China Mobile and China Telecom – and a series of service providers from tech majors: Huawei Cloud, Tencent Cloud, Alibaba Cloud, ByteDance’s Volcengine and Amazon Web Services.
China Mobile will focus on connecting computing resources through different data center hubs and developing communication channels through the network. China Telecom will build many data centers. By February, the company had already built 77 percent of data centers in Inner Mongolia, Guizhou, Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area and Chengdu-Chongqing, CAC reported.
Huawei Cloud has started building data centers in three hubs (Guizhou, Beijing, and Chengdu-Chongqing). The company’s data center in Guizhou is the largest in the world, with more than one million servers. Tencent Cloud has built two data centers in Chongqing. The first began operations in June 2018, with 100,000 servers. Alibaba Cloud plans to build data centers around Beijing, Inner Mongolia and Shanghai, adding to its data center hubs in 25 regions around the world.
ByteDance’s Volcengine told CAC that it is building a system of Content Delivery Network (CDN) nodes across the country to provide accelerators for transmissions between regions. The team is also looking to train technicians to manage data centers and help western regions build data center hardware supply chains.
Amazon Web Services has projects in the western region of Ningxia. Its first data center hub went live in December 2017, and the company announced plans to expand the center to more than double in size by 2021.
Besides large state-owned companies and tech giants, other niche companies in the data center industry are expected to benefit from the project. Sugon (or Dawning Information Industry Company), a supercomputer maker established by the Chinese Academy of Sciences, has worked with the Chongqing government to help them reduce power consumption in data centers by using cooling technology by immersion, according to a government report in May. . In addition, major Internet data center service providers in China, such as Nasdaq-listed GDS, Beijing-based VNET and Sinnet Technology, and Shanghai-based Yovole Networks, are expected to work with local governments on their data center projects. .
Potential concerns for a major infrastructure project in the digital age
Over the past decade, China has continued to see a growing demand for data storage and management, driven by the huge popularity of short video applications, live e-commerce, Internet of Things (IoT ) and other data-rich services. Data analytics firm IDC expects China’s big data and analytics industry to reach $11 billion in 2021, and it predicts that number will more than double to $25 billion in 2021. 2025. The data center project is an effort to meet these demands in advance, but some experts believe such foresight could create oversupply and hurt local businesses and economies.
Chen Gen, a science writer and guest lecturer at Peking University, wrote in a column in late April (in Chinese) that building large-scale and advanced data centers ahead of demand will “further deteriorate the situation of competition in the industry” and that “an oversupply of similar services will inevitably lead to lower unit prices, which could lead to lower profits.
Chen added that China’s plan to build these energy-efficient data centers will increase the cost and make it “difficult for companies to compensate for the losses associated with the construction of these centers, even with certain government subsidies.” The government has required large data centers to maintain their power utilization efficiency (PUE) below 1.3, which is considered efficient by global standards, and also required that at least 65 % of the capacity of each center is used at all times.
Such demands ensure that the data center project meets two high-level goals for the Chinese government. One is to establish a “unified internal market” to fight local protectionism and increase efficiency. The second is to peak carbon emissions by 2030 and become carbon neutral by 2060.
Liu Shiping, director of the fintech research center of the Chinese Academy of Sciences, told state media Beijing Daily (in Chinese) that he believes the green energy industry stands to benefit from the project. “Right now, 70% of our data centers run on coal. […] in the future, I can see that wind, solar and hydropower in the western regions of Yunnan-Guizhou-Sichuan will play an important role in powering data centers.
Wang Yuanzhuo, a computer science researcher at the Chinese Academy of Sciences, was quoted in the same report as saying he hoped the project would not become another example of “heavy build, light application”. In the past, many regions in China blindly invested in new energy vehicle and semiconductor projects due to beneficial government policies, but “many of these projects have been blocked and even harmed the local economy. “.
We’re still in the early stages of the national data center project, and it’s too early to tell if it will make long-term economic sense. However, China has shown that it has long-term and detailed plans regarding the use of data as a key national resource, from passing the Data Security Law in 2021 to setting up ‘a data exchange pilot program the same year and the regulation of technology companies’ algorithms in March. The data center project will be a key piece of infrastructure as China continues its drive to become a powerful digital economy with centralized control and tight oversight of its data.