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Gathering clouds, Is China about to create a state-owned cloud services heavyweight?

“It is a capital mistake to theorise before one has data,” warns Sherlock Holmes, the super sleuth of Arthur Conan Doyle’s novels.

‘Data’ – that precious commodity that Holmes was earlier than most to put a premium value on – is at the forefront of the Chinese government’s latest drive to bring the nation’s internet titans to heel. This follows months of recrimination and rebuke about their behaviour from Beijing. Now some major pieces of legislation surrounding the use of data are set to take hold over the next few months.

On November 1, a sweeping privacy law comes into effect, curbing the collection of information on individuals by technology firms. And as of Wednesday this week, companies were also subjected to new standards of data protection involving information about “key national security and economic lifelines”, including its transfer overseas.

This follows moves last week when officials from internet watchdog the Cyberspace Administration of China published draft proposals for taking more control of the algorithms used by technology firms to personalise and recommend content ­– the latest initiative in a raft of regulatory action across the internet sector.

And next up for focus is a series of restrictions on cloud computing businesses. The talk is that state firms will be steered away from the ‘public’ cloud to contracts with government-controlled providers instead.

Such are the reports after the Tianjin bureau of Sasac – the agency that manages 100 or so of the largest state-owned enterprises (SOEs) – told companies under its control to stop doing business with the public platforms run by the likes of Alibaba. Citing instructions from the State Council, the Sasac branch of the large northern municipality ordered a switch to state-run services called guoziyun, or “state asset cloud”, within two months of the end of existing contracts. There should be no dealings at all with non-government providers by the end of September next year, it confirmed.

It’s tempting to headline the story as yet another mashing for China’s embattled internet majors, who have been peppered with financial penalties and policy changes for much of the last six months. Yet the embargo seems likely to extend to those cloud service providers under state control as well, including units of China Mobile, China Telecom and China Unicom. They too will have to cede SOE business to a new breed of state-controlled cloud services firms.


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