Commentary on Political Economy

Thursday, 9 July 2020


Google rolls back on Chinese cloud ambitions

Google says it is not weighing options to offer its Cloud Platform in China © Bloomberg
Google has scrapped a project that could have allowed it to offer cloud services in China and said it had no plans to enter the market, one of the world’s largest.
The US technology company’s “Isolated Region” project, first reported by Bloomberg, would have allowed the company to set up cloud services and serve clients in countries with stringent data regulation policies.
Such an arrangement would be necessary for Google to compete in China’s cloud market, where foreign providers like Amazon Web Services and Microsoft need a local partner through which to sell their services. The company said other approaches it was pursuing simultaneously “offered better outcomes”.
The news that Google had abandoned its plans comes as its US tech peers are considering whether to pull out of Hong Kong, after Beijing imposed a wide-ranging law to quell political dissent in the region. Like Twitter, Facebook and Zoom, Google has paused responding to requests from local law enforcement while it assesses the new law. The company launched a cloud centre in Hong Kong in late 2018.
China’s cloud services market is the second-biggest in the world, according to market research firm Canalys, with infrastructure spending in 2019 growing 64 per cent to $10.7bn. At the same time, Beijing is planning new regulations to keep sensitive data within the country, meaning multinationals will have to turn to local cloud providers.

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The market, dominated by Alibaba and Tencent, is not welcoming to foreign players. China has tightened its licensing requirements in recent years, declaring that foreign companies’ local partners cannot just rubber-stamp sales, but need to play a bigger role in providing the service.
As a result, Amazon sold its physical cloud assets to its local partner Beijing Sinnet Technology in 2017. Microsoft offers its Azure cloud through 21Vianet, while Apple has teamed up with Guizhou-Cloud Big Data to offer iCloud to China users.
Meanwhile, Google’s cloud services are blocked in China, along with nearly all of its services and the company said it was not weighing options to offer the Google Cloud Platform in China.
“We’ve seen emerging requirements around adoption of cloud technology from customers and regulatory bodies in many different parts of the world. We have a comprehensive approach to addressing these requirements that covers the governance of data, operational practices, and survivability of software. Isolated Region was just one of the paths we explored to address these requirements,” said Google.
“What we learned from customer conversations and input from government stakeholders in Europe and elsewhere is that other approaches we were also actively pursuing offered better outcomes. Isolated Region was not shut down over geopolitical concerns or the pandemic.”

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