China is in the midst of an unprecedented data center construction boom that's providing business opportunities for U.S. companies and could see China emerge with one of the most advanced computing infrastructures in the world.
The country is building dozens, maybe hundreds of large data centers to support the needs of its fast-growing online population, estimated now at close to 500 million. The data centers will help to meet escalating demand from telecom providers, and for services such as e-commerce, online banking and e-government.
They will also provide computing infrastructure for overseas firms looking to expand in China. But the uncertain political and regulatory environment make it unlikely that China can turn itself into a hub for international business in the region, to rival countries such as Hong Kong and Singapore.
The build-out is strongly backed by the Chinese government, which has made expanding the national computing infrastructure a part of its latest five-year plan. And local governments are funding the development of vast "cloud cities" -- industrial zones that aim to provide the foundations to support as many as 20 data centers over time.
The boom is providing opportunities for outside firms such as Hewlett-Packard and IBM. "We have more people in China focused on data center development and strategy than, I believe, in any country in the world," said Rick Einhorn, worldwide director for HP's Critical Facilities Services group.
China is heavily reliant today on outside firms for design expertise, he said, although that could change as HP and other firms work alongside Chinese engineers and provide them with training and experience.
The nation's approach to data centers is "to build more and to build big," said Glen Yuan, executive of data center services for IBM's Greater China group. The facilities being built for banks and telecom providers are sometimes vast, covering up to 50,000 square meters (538,000 square feet).
China has seen waves of data center construction in the past, but those efforts were often hasty and suffered from poor planning, Einhorn and Yuan both said. Some data centers quickly exhausted their capacity, with the poor infrastructure making services in the country unreliable. This time around, China hopes to do it right.
The Suzhou International Science-Park Data Center (SISDC), in southeastern China, for example, is the country's first Tier 4-certified data center, according to Ivan Lau, a senior sales director with SISDC. Tier 4 signifies the highest level of reliability.
Built with help from IBM, an initial phase opened for business in October 2010, and the data center will cover 42,000 square meters when a second phase is completed in 2013 or 2014. The Suzhou government is funding construction, with hopes of making the industrial park where it is based a major hub for IT services.
About 80 percent of the existing capacity is in use or reserved by customers, Lau said. Many of its biggest customers are foreign financial firms, which are required by Chinese law to store data about its citizens within the country.
Government directives on carbon emissions mean data centers are being built using modern, energy-efficient technologies, Einhorn said. Some employ modular, multi-tier designs, which help to match power and cooling equipment to the requirements, in turn reducing wasted energy.
But while data centers are booming for domestic use, some are skeptical that companies will pick China as a base for providing IT services internationally. "There are questions around ownership rights for data and other assets," said IDC analyst Michelle Bailey. "It will be interesting to see if China can evolve its policies to keep in step with the market."
A former security consultant who worked on data center projects in China said foreign companies have several causes for concern. He sees three main areas of risk -- local employees absconding with data, traffic being monitored or interfered with, and the loss of equipment during sudden "inspections" by Chinese police.
"The last of these is what sets China apart from most other geographic options," and can result in the government cutting off access to equipment for several days, said the consultant, who asked not to be identified. Trying to get outside firms to host their IT infrastructure in China is "an exercise in futility," he said.
Lau said those fears are unfounded and may have been fuelled by Google's much-publicized problems in the country. As long as companies follow China's rules and regulations, they will face no problems locating data centers in China, he said.
There are other challenges too, however, such as securing adequate bandwidth and power. And China needs to keep pace with a population that is adopting PCs, smartphones and tablets at a rapid pace, said Sheldon He, a product marketing manager with Intel.
The client-to-server ratio in China is currently more than 60 to 1, he said, while in the U.S. it is closer to 20 to 1.
"China has almost five times the population of the U.S., so our problems are five times greater," He said. "We have the world's biggest billing systems. If we can succeed in solving these problems it could lead to innovation."