Tencent carves out $70bn for Chinese cloud expansion

Hong Kong-based Tencent has said it plans to expand its business into cloud computing services, ranging from traditional data centres to enterprise AI services.

While it might be a titan in certain segments of the telecoms and technology world, enterprise cloud services is not a significant earner for Tencent. That said, the Chinese cloud computing market is only a fraction of what it could be as it is still pushing through its digital transformation programme.

“As one of the leading cloud service providers in China, Tencent invests heavily in talent and technological innovation, actively promoting the development of the Industrial Internet,” a Tencent spokesperson said.

“We recently announced our new initiative to invest RMB500 billion ($70 billion) in new digital infrastructure over the next five years. The investment will focus on a number of fields including cloud computing, artificial intelligence, blockchain technologies, servers, large-scale data centres, supercomputers, Internet of Things, 5G networks, audio and video communications, cyber-security, quantum computing and more.”

The team has said it will construct a series of large data centres, each of which will contain more than a million servers. With more companies having their eyes opened to the benefits of remote working and cloud computing, this might be a sensible time to push forward with such plans.

China cloud computing market Q4 2019
Company Market share
Alibaba 46.4%
Tencent 18%
Baidu 8.8%
Others 26.8%

Source: Canalys

For the final three months of 2019, total spend for cloud computing was $3.3 billion. This is still the second-largest market worldwide but considering the scale and breadth of the Chinese economy, there are huge profits on the horizon.

What is not entirely clear is whether this strategy is a prelude to an assault on the international cloud markets.

A strategy which is becoming common for Chinese telecoms and technology companies is to generate significant revenues in the domestic market before looking internationally. Huawei did it for base stations and consumer devices, Xiaomi is attempting this move for its own smartphones and Alibaba is attempting to implement the expansion for cloud services.

The Chinese cloud computing market can act as a springboard for greater profits in the future, but for the moment, there is incredible opportunity as this monstrously large economy shifts into the cloud.

Apple U-turns again to pull HK map app under pressure from Beijing

Apple has removed the crowd-sourced app HKmap.live, favoured by the protesters in Hong Kong, from its local App Store, after being blasted by China’s state media.

The submission of the mapping app, developed on top of the web version which could enable users to instantly track the police movements, among other things on the roads, was first rejected by Apple, on the ground that “the app allowed users to evade law enforcement.” This caused strong protest from both local users in Hong Kong and politicians in the US so Apple reversed its decision and made the app available. The US Senator Josh Hawley (R-MO) told his followers on Twitter that Apple admitted it “mistakenly” failed to go through full review process the first time:

Shortly after the change of mind by Apple, the People’s Daily, one of the Chinese Communist Party’s major propaganda outlets, accused Apple of “helping HK rioters engage in more violence”. Apple quickly undertook a second reversal in days to take down the app. The company said in a statement on the decision that the app “has been used in ways that endanger law enforcement and residents in Hong Kong.” The web version is still available.

This is only one of the latest actions Apple has taken after finding itself caught in a perfect political storm. One day earlier it also removed Quartz, the online news publication, from the China App Store, following complaints from the Chinese government. Apple told Quartz that the app “includes content that is illegal in China”, reported The Verge.

Quartz believed this might refer to its discussion on VPN technologies, the use of which is illegal in China, and its coverage of and links to coverage of the ongoing protest in Hong Kong. Quartz’s website is also blocked by China’s Great Firewall. A week earlier when Apple updated its operating system, iPhone users who set their locale to  Hong Kong and Macau found the Taiwan flag had disappeared from emojis.

This is just one of the highest profile cases of global companies contorting themselves to appease local political interests, with China the centre of attention not the least because of its reputation as one of the most censorious countries, Apple vs. China only epitomises the delicate balance almost all global companies are forced to strike, and not always successfully. Whenever they enter markets that operate very differently to their domestic one, these companies, especially those from North America and Western Europe, have to make a choice between the values of their origin and market pressure.

Increasingly we have seen companies surrender to market pressure, which has led to more either remedial or even pre-emptive self-censorship. Such conflict has a long history in the digital age. Back in 2010, Google pulled out of China when it decided to no longer comply with the latter’s demand for censoring search results. In the same year, India, Indonesia, UAE, Saudi Arabia, among others, demanded access to the encrypted communication carried out by the then king of instant messaging, BlackBerry Messenger, for national security and data localisation purposes. RIM, the then owner of BlackBerry, bowed to the Saudi pressure, and Nokia, who also operated messaging services, decided to set up a local data centre in India.

Recently we have seen Google’s repeated attempts to re-enter China, by offering willingly to censor content to please the Chinese authorities, despite backlashes in its own office. Meanwhile games developer Blizzard had faced a backlash for acting against a Hong Kong protester, as has the US NBA for similar activity.

Apple rejects crowdsourced map app used by Hong Kong protesters

HKmap.live is a crowdsourced web app that shows the location of Hong Kong protests and police activity. Apple has rejected the app version of it.

This is the feedback the developers got from Apple, which they shared in a tweet. “Your app contains content – or facilitates, enables, and encourages an activity – that is not legal … Specifically, the app allowed users to evade law enforcement.” The tweet goes on to object to the assumption that the app is used to break the law, but Apple seems to be saying that any app used to identify the location of coppers is intrinsically illegal.

Initial reports on the matter implied Apple had banned a pre-existing app, but the developers subsequently tweeted to clarify that the app had been rejected during the review process and to say that its main frustration was the glacial progress of that process. It also noted that anything can be used for illegal purposes in the wrong hands and that the app is designed only to provide information. It has received some support for its position.

This minor controversy puts Apple in a delicate position as it raises the question of whether its decision was influenced by pressure from China. The Hong Kong protests were prompted by apparent attempts by China to exert greater direct control over the semi-autonomous region and have become a significant embarrassment to the Chinese government. If it continues to the block the app, Apple will be under increasing pressure to demonstrate it’s not doing so for political reasons.