When Argentina faced an economic crisis in 2010 its government decreed that manufactured products sold in the country had to be made locally. Blackberry accepted the conditions and opened its first production plant in the South American nation. But Apple, like many others, decided it didn’t need the Argentinian market that badly and didn’t comply. Soon iPhones became hot commodities on the black market.
But when it comes to directives from the Chinese government, Apple has been a little more flexible. Last week the company acquiesced to regulatory demands that local cloud services be managed by Chinese companies; it announced its first China-based data centre, and appointed a state-owned enterprise in Guizhou to operate the facility.
The data centre is part of a $1 billion investment plan Apple has signed with the province. Guizhou is home to the nation’s first Big Data pilot zone, so it’s likely that the central government directed Apple to set up in the province, which is one of China’s poorest.
(Till last week the most senior official in the province was Chen Min’er, a confidant of Chinese leader Xi Jinping; Chen has been promoted to run Chongqing, taking over from Sun Zhengcai, who reportedly has become the subject of an anti-graft investigation.)
Guizhou is known more for baijiu than innovation (it’s where Maotai is made). An old saying describes how harsh life could be in the mountainous region: “Not three feet of flat land, not three days without rain, and not a family with three silver coins.” But the province’s fortunes began to change in 2014 when Chen Gang, Party boss of the provincial capital Guiyang, began to steer the local economy towards high tech and Big Data, harnessing the area’s natural landscape to make the change.
Big Data processing requires a large electricity supply (see WiC369 for how much energy is used just mining Bitcoins) and Guiyang is well positioned to provide that. The city is situated at the starting point of the West-East Power Transmission line: a national project launched in 2005 to boost GDP in the western provinces (by investing in power infrastructure there) and supplying electricity to eastern China.
What Guiyang did lack, however, was a rich talent pool. But Chen Gang saw that if the city developed a more favourable environment for Big Data companies, that would naturally attract talent. His faith has been well rewarded: Qualcomm, IBM, Microsoft, Dell, Foxconn, Alibaba, Huawei, Tencent and Baidu have all opened shop in the city since it established the first Big Data pilot zone in China.
Many of those companies were in attendance at Guiyang’s recent Big Data Expo, held annually in the city since 2015. Fittingly the theme of the event was “Digital Economy Drives New Growth” which certainly rings true in Guiyang: it was considered China’s best performing city by the Milken Institute last year, leaping from 11th place the year before.
Guiyang’s Big Data Pilot Zone will also be home to the Huawei Global Data Centre, a processing plant developed in partnership with Alibaba, as well as a second data centre for Tencent. The district intends to create 30,000 new jobs and host up to 300,000 computer servers.
Wang Cunfu, an official with the Ministry of Industry and Information Technology, claims that by 2020 China is expected to house 20% of the world’s data capacity, and Guiyang has positioned itself at the vanguard of that digital tidal wave.
The city is now hoping to become a pioneer in developing online data security too. New data security rules have rattled foreign tech firms and are included in the government’s latest cybersecurity laws – the regulations that have required Apple to partner with a local state firm to manage any data derived from China. There are concerns that the regulations will give the government and local enterprises access to valuable client information, although Apple addressed this fear directly, stating, “No backdoors will be created into any of our systems.”
Guiyang’s transformation has even sparked an unexpected debate across the Taiwan Strait.
That was triggered by an article published by the island’s Business Weekly recently. Nearly 50,000 people were attracted to Guiyang’s Big Data Expo but there were only a few representatives from Taiwan. “There is nothing in Guizhou besides Moutai, why bother going there?” a Taiwanese executive told Business Weekly. In order to bolster the island’s economy, the magazine noted that Taiwan’s economic ministry proposes to host a Braised Pork Rice Festival. “Guiyang is talking about Big Data and we are stuck with braised pork rice,” Business Weekly mocked. The article has since gone viral, stirring debates about development strategies in the Taiwanese media.
© ChinTell Ltd. All rights reserved.
Brought to you by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.