Chinese regulator hints at better access for foreign cloud computing companies

China’s Ministry of Industry and Information Technology (MIIT) said it welcomes foreign company participation in its efforts to explore ways to further reform and open the country’s cloud services market, signalling a possible shift in the way Beijing controls access to the world’s fastest growing cloud market.

“Chinese regulators approve of foreign companies conducting cloud-computing business in China via cooperation with local firms,” said Wen Ku, director of the telecom department at MIIT, the main regulator of China’s cloud sector.

“Under the premise of obeying Chinese laws and policies, foreign companies are welcome to actively participate in the cloud computing market, explore effective ways to further open the market and help to boost the market,” he said in a press conference in Beijing on Tuesday.

Wen’s statement, which still implied a requirement for local partners, came in response to previous reports that China was considering a “liberalisation pilot” project in one of its free trade zones that would allow foreign cloud computing providers to operate without a domestic partner.

The Wall Street Journal first reported the “liberalisation pilot” as a proposal raised by Premier Li Keqiang in a meeting with senior executives from global corporations, including IBM, Pfizer, Rio Tinto, BMW and Daimler, in Beijing in late March. The proposal was part of a package of technology-related issues Chinese negotiators would discuss with their US counterparts to try and reach a deal to end the year-long trade dispute, according to the report which cited people familiar with the matter.

US cloud providers such as Amazon Web Services (AWS), Microsoft and Apple have made heavy investments to provide cloud services in China, but are hampered by regulations that require foreign companies to form joint operations and license their technology to a local partner to get into the market.

China has the world’s fastest growing public cloud market. In 2018, it grew 76.5 per cent year on year to US$7.2 billion, according to data from IDC. The sector is dominated by local Chinese players, with Alibaba Group Holding subsidiary Alibaba Cloud the market leader.

Alibaba Cloud took 43 per cent of China’s public cloud market in the first half of 2018, while Amazon.com’s AWS, which is the top performer among foreign players, was a distant fourth with 6.9 per cent, according to IDC.

New York-listed Alibaba is the parent company of the South China Morning Post.