China's cloud market services spending surges to $9.2bn

Mainland China's spending on cloud market services escalated by 18% in the third quarter of 2023 amounting to a spend of US$9.2 billion, which makes up 12% of the global spend on cloud services, as suggested by estimates from Canalys. Despite its dependency on government and state-owned bodies for growth, the Chinese cloud services sector maintains a constant emphasis on innovative AI technology, persistently unveiling new AI products and solutions.

Canalys data also indicates that Alibaba Cloud, Huawei Cloud, and Tencent Cloud, the top three cloud service providers in mainland China, collectively expanded by 22% in the third quarter of 2023. The trio accounted for a substantial 73% in client expenditure, demonstrating a change in cloud strategy which sees a growing emphasis on nurturing partner ecosystems within Chinese cloud providers. Sustainment of revenue in Q3 2023 saw an increase to 25% from 23% in the previous quarter through channels in the Chinese market.

Despite Chinese cloud services seeing a period of stable growth, the leading vendors still invest heavily in AI technology. This highlights collective commitment to keep pace with the growing trend of AI technology. Canalys register that most vendors recognise the importance of partnerships and the support required for the progress of AI technology, remaining open to the challenges presented by AI's adoption and deployment, which in turn presents a range of opportunities for a broader range of AI systems.

Yi Zhang, an analyst at Canalys echoed this sentiment, highlighting that extensive deployment of AI technology would be a daunting task for vendors without the helpful range of partnerships, namely developers, Independent Software Vendors (ISVs) and experts, who collectively ensure delivery at scale to customers. This approach can be seen within partnerships such as those between Salesforce and Databricks with hyperscalers like AWS and Google. According to Zhang, the merging of technical expertise and offerings will be crucial to capture market growth opportunities and creating value.

In terms of growth statistics, Alibaba Cloud held the crown in Q3 of 2023, with a 39% market share. In its recent earning reports, Alibaba stated the cancellation of its plan to make its cloud business unit separate and is set on optimising profitability. Alibaba cloud has launched Bailian, an all-in-one AI foundational model development platform, streamlining tasks around model selection, development, training and fine tuning. It also announced its first data centre in the Central China region in Wuhan.

Meanwhile, Huawei Cloud secured the second position among the cloud service providers with a 19% market share, as it grew by 16% year on year. Huawei Cloud has revealed its AI Gallery platform that incorporates various open-source AI foundational models, catering to global enterprises and developers by enabling the customization of AI model applications. It has also planned to support the growth of 1,000 European startups on the cloud over the next five years.

Although Tencent Cloud's growth was slightly lower at 14% it still resulted in a 15% market share. Notably, Tencent Cloud exceeded expectations in its business performance, following its decision to shift focus away from low-quality and low-value projects. It further announced plans to expand the range of cloud services available for channel partners from 80 to over 110 this year, with an eventual aim of entrusting sales rights for all products to partners.