Technology Jul 15

China speeds up construction of data centres

Country to spend nearly $60 billion on data centres this year, with demand driven by 5G, the Internet of Things, industrial digitisation, plus digital finance

China speeds up construction of data centres
Demand for new data centres is expected to grow at 30% a year, some analysts have said. Image: iStock.  

(ATF) This year, China clearly wants to speed up the construction of new infrastructure such as 5G networks and data centres, and a number of data centre projects will be built around the country. 

The overall size of the data centre market will grow rapidly, and the average annual compound growth rate is expected to be no less than 30% per year for the next three years, according to the Economic Daily.

Data centres are an important part of information infrastructure and China’s “new infrastructure" plan. In recent years, the pace of investment and construction of data centres in China has continued to accelerate, and the number of existing data centre racks in the country exceeds 2 million.

On March 4 this year, the Standing Committee of the Political Bureau of the CPC Central Committee convened a meeting to accelerate the building of new infrastructure such as 5G networks and data centres. This also means that construction of data centre projects in various places will continue to expand. With the advent of the digital economy, how many data centres does China need to invest in?

Various localities have implemented this decision and the central government plan this year, speeding up the number of new infrastructure construction projects. Data centres  have become a key point of new infrastructure in various regions.

416 billion yuan to be spent this year

Sun Huifeng, president of CCID Consulting, predicted that this year, China's data centre investment would reach 416.7 billion yuan ($59.6 billion), an increase of 12.7% year-on-year. By 2025, this sum is expected to reach 708 billion yuan ($101 billion).

Why are localities keen to invest in and construct data centres?

He Baohong, director of the Institute of Cloud Computing and Big Data at the China Academy of Information and Communications, said the data centre is an important new element of infrastructure, not only serving the Internet, but also digital transforming traditional industries and promoting the transformation of local industries.

"With the development of 5G and industrial internet, the internet and traditional industries will be further integrated, and new infrastructure will gradually shift from supporting consumption to supporting industrial development and social digital governance, becoming the digital infrastructure for the entire economic and social development, and data centres will also become varied, and this development will greatly increase its importance in the entire economic system," He Baohong said.

Huang Wei, chairman and CEO of IWC, said the data centre business has grown as the internet developed. In the digital economy era, the stable operation of data centres is an important guarantee for the normal work of various industries. It does this by providing services for clearing and settlement of financial institutions, consumer payments, and social and economic activities, by supporting online offices and instant messaging. So, it can ensure the normal operation of enterprises and personal communications.

Injecting momentum into economic growth

Pan Helin, Executive Dean of the Digital Economic Research Institute of Zhongnan University of Economics and Law, said the data centre will provide important support for the construction of "smart cities". On the other hand, the digital economy will be supported by the data centre. The rise will drive industrial upgrading from both the supply and demand sides and inject more new momentum into economic growth.

There are many shortcomings in China's infrastructure. The State Council's Central Economic Work Conference has said for the past two years it is necessary to accelerate the construction of new infrastructure.

So, various regions have accelerated the pace of "new infrastructure" and launched a series of investment projects. "Government Work Reports" from various provinces show that a number of data centre projects will continue to be launched this year.

Industrial digitisation

"Data centres are the key infrastructure for industrial digitisation. With the rapid increase in network data volume, the rise of cloud computing, and the beginning of the 5G era, the demand for data centres will increase significantly," Pan Helin said.

This year, in response to the impact of the coronavirus epidemic, many industries are speeding up and expanding online business. The demand for vertical businesses such as e-commerce, live webcasting, and online games, and the scale of business are constantly rising. And traditional industries such as finance and manufacturing have also accelerated this process.

Demand driven by 5G, Internet of Things and crypto

Pan Helin said epidemic prevention and control work has achieved major strategic results. Many new formats and models had developed further and become more mature because of the impact of the epidemic, so the demand for data centres was also increasing. The need for data centres was also being driven with the arrival of 5G networks, the Internet of Things, blockchain and other technologies.

He Baohong believed that with convergent development and widespread penetration of digital technologies represented by 5G and the Industrial Internet, low-latency and large-bandwidth application scenarios would continue to increase. And this would bring about a substantial increase in data volume and drive the expansion of data centre demand. He said that the overall size of the data centre market would continue to grow rapidly – the average compound growth rate is expected to be no less than 30% a year over the next three years.

Huang Wei said that, at present, China's demand for data centres is mainly concentrated in eastern economically developed provinces, as the population and density of internet users in these regions was far ahead of the central and western regions.

The number of large Internet, cloud computing, innovative tech enterprises and government and enterprise users was also far ahead of other regions and had made a greater contribution to the digital economy. The eastern region had the most demand for data centres in China.

"At present, the availability of data centres in these regions has reached 60% to 70%, significantly higher than other regions, and the supply and demand gap is still expanding." Huang Wei predicts that in the next five to 10 years, China's demand for data centres will continue to increase, especially as 5G applications become more mature, and have more applications.

15 to 20-year life cycle

He Baohong suggested that when building new data centres, authorities should pay attention to scientific planning and overall layout, to classify and plan large and super-large data centres and edge data centres.

The latter supports short-cycle data storage and real-time business processing, which requires high network latency and localised deployment, while large and ultra-large data centres support long-period data storage and big data analysis services, and require network latency. These construction needs can be gradually transferred to the suburbs of first-tier cities, surrounding cities and even in the central and western regions.

"Data centre investment as a heavy asset is measured by a life cycle of 15 to 20 years. If the layout is improper, it will most likely lead to a bad investment."

Huang Wei noted that over the past 10 years, demand typically exceeds supply in economically developed areas, and that supply exceeds demand in economically underdeveloped areas.

Therefore, officials should consider population density and corresponding traffic demand when making decisions on the layout of data centres, along with local policies, the natural environment and other factors. They needed comprehensive planning to achieve a reasonable spread of national resources.