Big Data In China’s ‘Wild West’

Guest contribution by Ravish Bhatia, Yenching Scholar at Peking University.  In times gone by, the old Chinese proverb: “Never three sunny days in a row; not one metre of road that isn’t bumpy”, would have been particularly true for Guizhou, a small province in Southern China with a large ethnic minority population and over 3 million people trapped in poverty. However, emboldened with a great investment push from the Chinese government, Guizhou recorded the second-highest growth rate among 31 provinces and municipalities in 2016.

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Source: www.Chinadiscovery.com

The recent focus on Guizhou can be seen in light of China’s “Go West” strategy that was launched in 2000 to boost economic development of 12 western provincial-level regions that are home to more than 400 million people. The results speak for themselves; in the period 2011-2015, over 6.5 million people were lifted out of poverty in Guizhou.

In its latest development initiative, Guizhou’s provincial government has been investing heavily in the province’s big data ecosystem. In 2013, there were fewer than 1,000 big data companies operating in the province; by the 2017 the number had skyrocketed to over 8,900. 28 big data research centers, 23 big data incubators and multiple investment vehicles have been established to promote the industry’s growth. Already, the industry contributes more than 20 percent of economic growth. Chinese industry behemoths; including China Mobile, Huawei, Aliaba and Tencent have all built big data bases in the province.

A new ‘Third Front Movement’ or something more?

In 1964, Mao Zedong initiated the Third Front Movement (三线建设) to move heavy industry, especially in sectors like defense, towards China’s interior. The move to build Guizhou as the country’s big data hub seems to be directly out of Mao’s handbook. But as one source involved in the planning of Guiyang’s (Guizhou’s provincial capital) Big Data Development Hub told us, the primary reason is that approximately 80 percent of costs involved in the big data industry are associated with cooling and maintenance of servers. Guizhou’s climate is conducive to such tasks, especially given its mountainous terrain in which big data servers can be kept in caves.

Testing ground for Party Policies and Party Leadership

Guizhou has been and continues to be a policy testing ground and succeeding as a local government official in Guizhou is often a way for leaders to move up the Party hierarchy. Notable examples include Party Secretary Zhu Houze who ran the Central Propaganda Department in 1985, President Hu Jintao, and most recently Chen Min’er (陈敏尔), who was Deputy Secretary and then the Secretary of Guizhou between 2012 and 2017. Chen Min’er is often seen as Xi Jinping’s protégé and was this year elevated to the position of General Secretary of Chongqing. Chen Gang, the official who spearheaded the development of Beijing’s tech district Zhongguancun, was also drafted into Guizhou, before being recently appointed as Head of Xiongan New Area, the newly conceived economic zone with President Xi’s direct approval. The appointments of such experienced individuals in Guizhou show just how serious the government is about building Guizhou into a big data hub.

Policies towards foreign firms reinforce Guizhou’s big data dominance

In June 2017, China passed a new Cyber Security Law that requires cloud services to be operated by Chinese companies, meaning foreign multinationals must either lease server space inside China or establish joint ventures with Chinese partners. In response, Apple will be building a data centre in Guiyang which is expected to launch in 2020 at a cost of $1 billion. Additionally, until the servers are built, all iCloud accounts registered in mainland China have been transferred to state-run Chinese servers belonging to Guizhou-Cloud Big Data Industry Co Ltd. (GCBD) along with the digital keys needed to unlock them. Other international technology giants wishing to invest in the Chinese mainland are likely to be forced into following the same route as Apple.

Drawing in high quality talent is critical for success

No development project of this scale comes without its concerns. The big question faced by policy officials in Guizhou is how best to attract and retain quality talent to the city. The big data industry is heavily dependent on human capital, both in the realms of hardware and software. In response, provincial government has enacted a trifold strategy. The first part of this strategy is to develop talent locally, revolving around the Huaxi University Town which comprises nine local universities and 110 big data companies. Secondly, Guizhou is being promoted as a clean, environmentally friendly and picturesque province with good living conditions and extremely beautiful mountainous ecology. Thirdly, there is an effort to outsource some IT requirements through research collaborations and partnerships, for example with India.

International Partnerships will be leveraged to accelerate development

In November 2017, the Guizhou Cloud & Big Data Collaborative Innovation Center was established in Bangalore, India. The primary Indian partner was the National Association of Software and Services Companies (NASSCOM). As per the center’s website, “The purpose of the Collaborative Innovation Center is to create an open and ecologically-friendly platform which is rich in human resources and R&D…to establish a win-win and sustainable strategic partnership through close cooperation with NASSCOM”. These sentiments are very much in line with GCBD’s ambitions of matching its infrastructure capabilities with software capabilities from other parts of the world, in what has been described as a ‘win-win’ partnership.

China’s Wild West in the New Era

At a time when the government is promoting nationwide technological upgrading, Guizhou’s selection as China’s first big data hub and the resultant rapid development of the sector, highlight the economic significance of this little known province. Foreign Minister Wang Yi has described Guizhou as a “new force” in China’s Belt and Road Initiative based on its strategic location and importance for the digital silk road.

A development strategy of selecting a sector specialism, followed by large government investments, is not unique to Guizhou though. Indeed, many of China’s Western cities and provinces in China are pursuing such strategies (e.g. renewable energy in Xinjiang). This highly targeted model of developing poorer regions is having visible effects on the ground; whether that be through building tech clusters, upgraded infrastructure or otherwise. However, as the recent decision to stall all debt-fueled government infrastructure projects in Xinjiang attests to, such a strategy does not come without its concerns; and balancing speed of development with quality of development remains a priority. Whether the strategy will succeed is likely to be highly context specific; however, the early signs in Guizhou are that the combination of carefully choosing an industry essential for the nation’s future, coupled with elite political leadership, will be a powerful one.