Chinas-Cloud-Cities 06-12

China’s Cloud Cities

May 23, 2016
A Lesson for the Future by: Todd Bundy and Michael Haley (This article originally ran in the June 2012 issue of OSP Magazine.) China is amid an aggressive build-out of “cloud […]

A Lesson for the Future

by: Todd Bundy and Michael Haley

(This article originally ran in the June 2012 issue of OSP Magazine.)

China is amid an aggressive build-out of "cloud cities". Driven by China’s 12th Five Year Plan with anticipated spending of RMB 4 trillion ($634 billion), cloud computing should be seen as part of China’s overall strategy to move from being the "world’s factory" to creating new, higher-value production hubs, as well as harmonizing China’s social needs between urban and rural citizens.

Seven industries are cited as strategic: next-generation information technology (IT), biotechnology, new energy, high-end equipment manufacturing, energy conservation and environmental protection, clean-energy vehicles and new materials. Attracting investments from foreign multinationals is an important component. [1]

Cloud infrastructures, networks and services delivery are envisioned as integral growth paths for China’s new economic hubs. If successful, China may develop some of the world’s most significant cloud centers and could be an international game changer in terms of favorable scale and global business flows. For example, IBM and China-based Range Technology will build Asia’s largest cloud computing center of 620,000 square meters (6.6 million square feet) in Langfang near Beijing to serve government departments, banks, private enterprise, managed hosting of cloud computing and mobile devices. [2] [3]

Five cities have been selected for cloud-center pilots to meet specific goals under the guidance of policymakers at the National Development Reform Commission (NDRC). The cities are Beijing, Shanghai, Shenzhen in Guangdong province, Hangzhou in Zhejiang province and Wuxi in Jiangsu province. In Beijing, cloud services will support storage for China’s leading search engine, Baidu, as well as PC manufacturer Lenovo and massive telco China Mobile. [4]  In 2009, IBM launched China’s first cloud at Wuxi Cloud Center to be used for collaborative software development between companies to enable a secure shared infrastructure, software testing tools and virtual resources priced according to usage. [5]

China has driven an ambitious coordination to link cloud centers with new software development and winning international investment streams from IBM, Apple, Intel Cisco, Microsoft and others. As a new economic hub in southwestern China, the government of Chengdu has invested in its new Tianfu Software Park with some 9,000 software developers on a single campus. Chengdu has also deployed economic high-tech zones and has launched Tianfu City integrating cloud centers, software development, powerful networks and enterprise tenants combined with diverse living and recreational facilities for high-tech workers.

Recently, ChinaSoft 2012, the largest software event in China, was held in Chengdu, capital of Sichuan Province (population 50 million). Some 3,500 leaders in business, academia, technology and government participated in Chengdu’s successful win of "China’s Most Famous Software City" award. Officials cited software development’s value at $18 billion, roughly 7 percent of gross domestic product (GDP) and growing more than 15 percent per year. Critical advances in cloud-computing security, software tools and business analytics were cited. [6] [7] [8]

China’s Telco Carriers Investing in Cloud

A critical link to the economic success of cloud-computing services delivery belongs to communications service providers (CSP) and their networks.

Like other carriers worldwide, CSPs in China seek profitable operations to leverage their huge infrastructure to support a mix of massive enterprises, government operations, research and nearly 1B mobile-phone users. Originally established as state-owned enterprises, China’s dominant CSPs also have a complicated set of obligations to the Chinese government.

Cloud computing is a way to capture enormous economic scale, lower costs and open new revenue streams. To extend its reach into new markets, China Telecom formed a strategic partnership with German software group SAP in May 2011 to offer a cloud-based version of SAP’s business software to small and medium companies in China. [9]

In another example announced in March 2012, three Chinese telco giants (China Mobile, China Telecom and China Unicom) will invest RMB 300 billion ($47 billion) in data centers in Chengdu in Sichuan Province to support cloud services delivery enabling electronics hardware manufacturing and software development to accelerate Chengdu as a new economic hub. [10] For China’s telcos, this comprises a significant mix of infrastructure efficiency, collaboration and policy successes to win new cloud services revenues.

China In/China Out

Cloud computing around the world is still in phases of initial adoption and successful early commercialization during the next 2 to 4 years. [11] In general, China’s cloud-computing development matches that global profile as of 2012. Many serious challenges remain in areas of systems integration, software automation, security, sustainable business models and skills. However, China has combined a powerful national policy, defined specific higher-value industries in which it wants to compete and has made (and persuaded) enormous investments in cloud infrastructure, software development and telecommunications service providers. This sets the stage for an extraordinary capability and potential global competition over the next 5 to 10 years.

China has assembled critical building blocks for success to leverage cloud computing as part of an economic powerhouse to address a variety of national goals. China’s investment is extraordinary, but its return on investment could be effectively guaranteed if companies within China successfully leverage its new cloud cities. Over the next phase of development, cloud providers would have an opportunity to improve both infrastructure and skills while serving their huge internal marketplace. One could envision this first phase as a "China In" strategy.

Leveraging the elastic, low-cost, on-demand cloud infrastructure, Chinese companies might be dramatically better positioned to compete across a wide range of industries and global markets. In the future, Chinese companies may create compelling competitive advantages that could attract global workloads onto their infrastructure as they reach out to other opportunities. This second phase might be seen as a "China Out" strategy. The world is a dynamic place and many challenges must be faced on all sides to win cloud business across borders. To be fair, global companies would have to reconcile data security, data localization regulations and compelling economics with cloud providers in China. But for certain workloads, distributed processing over global cloud networks may be advantageous — and opportunities will surely develop for cloud services partnerships outside China.

China’s bold move into cloud computing begs a question: What is the U.S. government doing to guarantee that this nation will be competitive? There is obviously no coordinated effort on the scale that we see in China. The government model in the United States is different, relying on a multitude of overlapping state and federal networks and data centers. Private enterprise market models in the United States still provide the world’s largest data centers, and U.S. IT spending is still 5 times that of China. [1]

But can U.S. free-market forces alone position economic hubs and cloud computing services delivery as effectively as China? Time will tell, but the more fragmented approach to next-generation computing and networking in the United States may give China’s planners of cloud cities the advantage in a rapidly commoditized IT world. Furthermore, what lessons might telecommunications carriers worldwide glean from China’s foray into the latest cloud computing technology?

State of the Art for Carriers

Today, cloud computing is evolving beyond enterprises’ consolidation objectives to enable previously unavailable new business models and top-line revenue agility. Companies can heighten security, boost compliance and support better disaster management. Development environment setup can be reduced from weeks to hours; web application development and provisioning of SAP test environments, from weeks to minutes. The number of administrative hours required per database and the number of operators required for application administration can be slashed. [11]

A purpose-built strategy for cloud data centers and the connectivity inside and between them is vitally important if a carrier is to be capable of efficiently offering cloud services. Large-scale operations comprise a critical economic requirement for successful cloud operations. As China’s cloud cities and leaders are already demonstrating, it demands no less than a sustainably funded transformation to define a strategy, target specific industry workloads and win commitments from network infrastructure providers, as well as commitments to software development and automation.

Interconnection via Programmable, Virtualized Optical Networks

Scalable data-center fabrics with integrated Wavelength Division Multiplexing (WDM) optics and control plane are necessary to ensure security and to lower the cost between cloud data centers. Carriers today must anticipate this move and make sure that their networks are ready.

Optical networks interconnecting cloud data centers must also be transparent to protocol, deliver lowest latency, provide unlimited bandwidth and performance, allow fully encrypted payloads and offer investment protection through vendor-qualified solutions for end-to-end system assurance. These are critical areas of technological differentiation that will determine whether a solution achieves a carrier’s specific interconnection requirements for cloud data centers. [11]


History will eventually show that cloud computing right now may be undergoing a remarkable moment. We have shown that cloud computing is more than a set of distributed computing technologies. Cloud computing is evolving globally, but China’s extraordinary cloud cities initiatives and strategy — if successful — may offer it an exceptional leap forward as an economic engine for new growth and tool for addressing urgent internal challenges. The lessons learned and impact of China’s moves stands to be seen in the decisions, investments, and tactics of carriers, enterprises, and governments around the globe.

Todd Bundy is Director Global Alliances, ADVA Optical Networking, Danbury, CT, USA. He has more than 26 years of experience in data centers and optical networking. He can be reached via email: [email protected].

 Michael Haley, Distinguished Engineer, IBM CHQ Enterprise Initiatives — Strategy & Cloud Infrastructure, Armonk, NY, USA. He has more than 33 years of experience as a technologist and executive in HDTV, video, telecommunications, grid computing, corporate strategy and cloud infrastructure. He can be reached via email: [email protected].


  1. “China’s 12th Five Year Plan”, APCO Worldwide, 2010-12-10,
  2. “IBM, China-based firm set to build Asia’s largest cloud computing center” by Michael Kan, 201-01-26, 2011 ComputerWorld (…)
  3. “Beijing to build leading cloud computing center”, China, Updated: 2011-12-13 (
  4. “Five cities chosen for cloud computing pilot plan”, China, Updated: 2011-11-18 (
  5. “Wuxi builds engine for economic growth with cloud computing solution from IBM: Minimizing cost and maximizing speed with cloud computing” validated 01 Aug 2011; (…)
  6. ChinaSoft 2012 Conference, Chengdu, Sichuan, China]
  7. “Report on Software and Information Technology Service Development of Chengdu in 2011”, published by Chengdu Committee of Economy and Informatization, 2012-2 (see English section)
  8. “Selected Advances in Cloud Computing 2012”, ChinaSoft 2012, Feb 21, 2012, Chengdu; Michael R. Haley, IBM Distinguished Engineer, Cloud Infrastructure, IBM Corporate HQ, Armonk, NY, USA
  9. “SAP in cloud deal with China Telecom”, gtb Global Telecoms Business, 18 May 2011 (…)
  10. “China telecom giants invest US$47.4b in data centers in Chengdu” Updated: 2012-03-15 (
  11. “IBM, Juniper, Level3 & ADVA: Impact of Cloud on Carrier Networks”, Pacific Telecommunications Conference, Michael R. Haley, T. Bundy, F. Street, J. Hudson, C. DeCusatis, 15 Jan 2012, Honolulu, Hawaii, USA
About the Author

ISE Staff