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China’s Plan: What does it mean to cloud computing?

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In “Cloud computing in China,” I discussed the general picture of cloud computing in China using two examples in Beijing and Chongqing. In this follow-up, I would like to put Cloud Computing in a broader context of the grand plan for the five-year period, from 2011 to 2015.

On March 11, 2011, the Twelfth Five Year Plan (the “Plan” hereafter) was ratified by the Chinese National Congress and that was approved by the Central Committee of the Chinese Communist Party in October, 2010. The Plan provided the guiding principles on nearly all aspects of China’s economic, political, and social systems nationwide for the five-year period, 2011-2015.

Traditionally, the Soviet-style five-year plan directs and governs the so-called “planned” or mandatory economy. The central government sets goals in all aspects of economic and social development at the national level and tries to encourage the growth in all regions in the country. Such five-year plans were learned from the Soviet Union, started in the year 1953, and it has been continued since.

About 30 years ago, China opened its doors to the outside world. According to Deng Xiaoping’s idea of the socialism with Chinese characteristics, the economic and social development should be a trial and adaptation process, or “fly by the seat of ones pants” (摸着石头过河). Under such principles, the five-year plan is no longer as rigid as the ones in the past; it now only serves as blueprints and guidance. It provides overall objectives and goals for social and economic growth, and industrial planning in key sectors and regions.

There are many unexpected events, man-made or natural disasters, that can greatly impact the execution of the Plan. Even not so dramatic, domestic and international economic and social environment changes can affect the execution of such a plan and force certain adjustments. Often these changed conditions will be taken into consideration to make proper modifications during the course of the five years. The Twelfth Five-Year Plan’s main themes are restructuring and re-balancing the economy around the nation, promoting innovations, emphasizing education, ameliorating social inequality, and protecting the environment.

Information technology and telecommunication is designated as one of the strategic technologies by the Twelfth Five Year Plan and placed under the control of the Ministry of Industry and Information Technology (MIIT). Around April of 2010, the MIIT drafted a guideline to include cloud computing as a pivotal role technology. The draft guideline was to promote developing cloud computing platform operations and application services, encourage enterprises that have used the technology internally to expand relevant services externally, and promote capable manufacturing companies to transform into service providers through cloud computing. Under the guideline, the government would select a number of pilot cities for the technology and organize key enterprises to start cloud computing services, indicating that there will be more government and enterprise cooperation projects in cloud computing in 2011.

In October 2010, MIIT selected five coastal cities, Beijing, Shanghai, Shenzhen, Hangzhou and Wuxi, to pilot the development of and innovation in cloud computing, to attract foreign investment, and facilitate the education and communication. Various companies in these five cities received funding designated for research and experiment for cloud computing by the central government.

In November 2010, CCID Consulting Co., Ltd published the first of the cloud computing industry white papers (available in Chinese only): “The White Paper of China’s Cloud Computing Industry Development” (http://tech.ccidnet.com/zt/cwb/images/cloudbook.pdf), sparked widespread media coverage and industry attention.

CCID Consulting is a direct affiliate to the China Center for Information Industry Development (CCID Group). CCID Consulting commits itself to becoming China’s number one advisor for enterprise management, number one consultancy for government decision. They had done extensive investigation nationwide and abroad, and generated many reports in various industry sectors. To understand what’s happening on cloud computing in China, one must keep close eyes on CCID’s analysis and reports.

In the white paper, cloud computing in China is summarized in three overlapping phases:

  • 2007 – 2010: Preparation period, mainly learning and accumulating knowledge, and training on cloud computing and its technologies and components.
  • 2010 – 2015: Growing and flying period, understanding and mastering cloud computing, increasing adoption speed, involving more and more enterprises in study, and investigating various cloud models (private, public, hybrid, and community), experiences are accumulated, and new systems will be deployed in a large scale.
  • 2015 and beyond: Mature period, technology and solutions are mature, cloud enterprises are chained into a whole set of ecosystems, cloud becomes infrastructure, standards and patterns are abundant.

The concept and importance of cloud computing may not be realized by the Chinese government, industry leaders and experts quite as fast as it is to other parts of the world, mainly because of the conservative, cautious, and pragmatic attitude of Chinese towards new technologies. Under the current emphasis and attention from the central government, academics, and industries, however, Chinese are likely to make up for the lag time quickly. It would be a big mistake if we underestimate that, because there is strong support from the government, the industry, and society with a lot of money and talent.

The wave of cloud computing investment in China started right after the Cloud Computing China Congress (CCCC) held in March of 2010. Not only the five cities designated by the central government, as mentioned previously, but many other provincial and local government also started their own projects, such as Chongqing, Guangdong, Shandong, Hebei, and others. It is said that the clear goal for Chinese government is to make China the largest IT and cloud hub in Asia at the end of the third phase.

Cloud computing is viewed by many as the third wave in modern technologies, after the personal computers and the Internet. The Chinese government and private sectors have realized this clearly. Because many private companies have close ties to the government, a lot of investments are really a partnership between state-owned companies and local government.

According to one Chinese official estimate, cloud computing market value will increase to $440 billion worldwide by 2013.Between the end of 2009 and 2013, cloud computing will generate revenue of around $800 billion worldwide, including over 1.1 trillion RMB yuan (or $175 billion) in China.

China’s huge domestic market is crucial. Many experts and leaders have clearly realized that it’s not easy for cloud computing providers in China to attract external services initially. There are many factors that can affect the influx of business from outside. In my own opinions, the domestic adoption is critical in the next 2-3 years. The success of the cloud industry will heavily depend on how well Chinese industries and government organizations adopt the technology and gain experience while learning the management and business processes of other developed countries, and upgrade their business and production systems. Using the knowledge accumulated in these 2-3 years, they can develop a whole set of standards and technologies to get on track with the standards adopted and recognized by other parts of the world. This is not to say that China will be in an isolated state, but rather emphasize more on internal transformation of the industrial structure.

Chongqing’s economic growth taught many lessons to the central government, and other provincial and local governments. When Chongqing was designated as the fourth Municipal City under the Central Government (直辖市), the main idea was to try a different approach and path of developing a new economic growth model. Chongqing is very different from cities like Beijing, Shanghai, Guangzhou, Shenzhen, and so on. It’s far inland. In the beginning, there was little external investment because its geographic location didn’t provide such advantages. When Chongqing was picked up as such an experimental city, the central government clearly wanted to explore a new way of growing economically and gradually transform the economy from the traditionally heavy export-based model that had been working well for the 20 years before.

Within a short 10 years, Chongqing really had done it with an A+ score. Chongqing of the 2000s was compared with Shenzhen of the 1980s and Shanghai of the 1990s. It pioneered a new growth model for many other cities, coastal or inland. The most important element of the lesson learned is the expansion of the internal domestic demand and consumption, and break away from the image of cheap-labor factories.

If the first 20 years of reform and open policy created a lot of millionaires and billionaires, the late last 10 years has created a generation of middle class with decent incomes. This is very similar to what happened in US during 1960s and 1970s. Only with a strong middle class with relatively good income, can the economy of the nation be strong and advance with steady rate.

In the Twelfth Five-Year Plan, the Chinese government will put heavy emphasis in education, economy transformation, industrial upgrade, and environment protection. Information technology and cloud computing are considered the central piece of the foundation. It’s not hard to understand why there is the recent heavy investment in cloud computing and other areas of information technology. Certainly such heavy projection of growth in information technology also opens up a lot of opportunities for leading industries from US, Europe, and other parts of the world.

About 200 years ago, Napoleon Bonaparte was quoted of saying “China? There lies a sleeping giant. Let him sleep! For when he wakes he will move the world.” (http://www.wideworldofquotes.com/quotes/napoleonbonapartequotes.html). With the 30 years of open-door and reform policy, the giant is now awake and is shaking the world. Still, there are plenty of problems, and the political system sometimes is in the way of economic development. A stabilized and peaceful internal and external environment will greatly benefit the transformation and restructure of industry and economy. The success of cloud computing plays vital role.

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