China’s cloud computing industry is projected to exceed 300 billion yuan ($42.3 billion) by 2023, by which time an estimated 60% of domestic companies and government agencies will be using cloud computing services, according to a new report.

In its latest white paper, published Saturday, the Development Research Center (DRC) of the State Council, China’s Cabinet, outlined the current state of the country’s cloud computing industry, as well as prospects for its future development and application. The report predicts that the domestic industry will eclipse 300 billion yuan by 2023 — over a threefold increase from its 2018 market value of 96.28 billion yuan — and that, in five years’ time, over 60% of the country’s businesses and government agencies will rely on cloud computing as an integral part of their daily operations.

But compared with countries like the U.S. where cloud computing is already well-developed, China’s industry lags far behind: The report said that the size of China’s cloud computing market in 2018 was just 8% of the equivalent market in the U.S. Meanwhile, China’s GDP in 2018 was around 66% of the U.S.’s GDP, suggesting the development of China’s cloud computing market hasn’t kept pace with the country’s economic growth.

Cloud computing entails using a network of remote servers — rather than a local server or a personal computer — to store, manage, and process data. With its 854 million internet users, China has the largest online population of any country in the world, generating an enormous amount of data that must be stored securely and can be extensively analyzed. Compared with on-site servers, cloud-based services are more scalable, affordable, and secure.

According to a report last year from market research firm IDC, cloud computing and artificial intelligence will more than double the rates of innovation (x2.6) and productivity (x2.3) at Chinese companies and organizations by 2021. For these reasons, cloud computing is considered a crucial infrastructural cog in China’s push for an industrial upgrade as it moves to embrace new technologies like artificial intelligence, internet of things, and big data.

“Looking around the world, cloud computing has become the infrastructure behind industrial intelligence upgrades,” Gong Chenguang, director of the DRC’s International Technology and Economy Institute, said at a press conference announcing the report. “We should strengthen governmental backing, take decisive action, and follow a clear development target … to push for the high-quality domestic development of the cloud computing industry.”

The Chinese government is already actively pushing for the development of the domestic cloud computing industry. China’s Internet Plus strategy, introduced in 2015, promoted the integration of cloud computing, big data, and internet of things to modernize manufacturing and other domestic industries.

According to data from the National Development and Reform Commission, China’s top economic planning body, in each year since 2010, the central government has invested over 1 billion yuan toward developing the domestic cloud computing industry, amounting to over 10 billion yuan invested as of this year.

In the decade since e-commerce giant Alibaba became one of the first domestic players to tap into the market in 2009, China’s internet giants, too, have been pouring resources into building up their cloud infrastructure services. Companies like Huawei, Tencent, and Baidu are now working feverishly to deploy their own cloud computing-based services.

Globally, the cloud computing industry is dominated by American companies such as Amazon, Microsoft, and Google, which controlled a combined 57% of the overall market in 2018, according to research firm Canalys. For comparison, the world’s next-biggest player, Alibaba, had just 4% of the global market — though one of its flagship products, Alibaba Cloud, accounts for over 40% of China’s cloud computing market.

Editor: David Paulk.

(Header image: A man walks among rows of servers at a data center on the campus of Taiyuan University of Technology in Shanxi province, May 18, 2015. VCG)