Chinese data center industry experiencing very strong growth

The Chinese data center market is forecast to grow at a 20 percent compound annual growth rate (CAGR) for the next five years, predicts a report released by DCD Intelligence, the research division of DatacenterDynamics.

The Chinese data center industry has experienced very strong growth in recent years, especially in metropolitan cities such as Beijing, Shanghai and the satellite cities around.  

China’s booming economy and insatiable demand for new technology, driven by the countries booming business expansion, is fuelling huge growth and creating demands for data center markets.

Moreover, the Chinese government is investing heavily in innovation and technology development, especially cloud technology, to increase data center capacity and to promote new innovations.

The huge consumer base is driving growth in the key ICT service, telecoms/media and finance sectors, all of which are key to data center market development.

According to the “China Data Center Market Trends 2012 – 2013” report,  Beijing has witnessed a 45% growth in ‘end user white space’ in data centers during the period 2011-12 compared to a lower but still highly significant growth rate of 29.3% across the whole of China.

Beijing currently accounts for both the largest amount of end user operated data center white space in China and the greatest amount of investment.

Launching the new report Nicola Hayes managing director of DCD Intelligence said, “Although Hong Kong is the most developed data center market in China, Beijing and Shanghai are rapidly establishing themselves as data center hubs. Both cities have overtaken Hong Kong in terms of total available white space.

The ‘China Data Center Market Trends 2012 – 2013’ report also estimates that total investment in the China data center market over the past 12 months was US$ 5.9 billion and forecasts that this will increase to US$ 7.5 billion from 2012 to 2013.

Investment in the Beijing data center market 2011-2012 accounted for 32% of the overall figure.

Over a quarter of data center infrastructure in China is currently outsourced. The report also found that power consumption is on the increase with a total consumption of 3.8GW forecast for the end user data center market by 2015.

The report also highlights that over 50 percent of data center end users have invested in virtualization implementation over the past 12 months, and  that cloud uptake is expected to show upwards of 30 per cent growth over the next 12 months.

Meanwhile, perceived government issues, such as those related to Google, could affect China’s attractiveness.

“The rigid Internet supervision by the Chinese government has brought the challenge to the attractiveness of the Chinese data center market,” says Shanghai-based Analyst Hawkins Hua. “Although the markets such as China offers strong potential benefits associated with growth, it also carries a variety of risks associated with investing in a region with a number of different cultural and regulatory environments. For those multinationals not accustomed to that control, Hong Kong would be a more favored site.”

Hong Kong is the earliest established major data center location in China focusing on the local financial market, offering an alternative for companies which prefer to locate their core data centers outside of the PRC in part due to fear of the governmental control over the Internet.

However, due to the space limitation, the forwarding prospect for Hong Kong is not as direct as for Mainland China. Given the heritage and weight of existing facilities, it will in all probability remain a key market in Asia Pacific, but the grow rate will not be as large as Mainland China.