A Brief Summary of the Challenges of DC Establishment in China

By Oliver Jones, Chief Executive at Chayora Limited

In terms of accessing the Chinese population for online services, the challenge is wholly different to any other major market. The national firewall is highly effective and means businesses wanting to participate in the huge and growing online markets of China have to have servers present inside the firewall operated strictly in accordance with MIIT regulations.  This contrasts with any other major country where servers can be anywhere and effective access is enabled across the open internet.

Establishing such a presence in China is challenging as the market and internet access specifically is highly regulated and processes are complex. Additionally, most international organisations find dealings to be opaque, and SLAs are scarce or disregarded meaning it is very challenging to secure levels of performance assurance anywhere close to that experienced in other major markets.

Specific challenges arise as the otherwise ubiquitous and generally commoditised availability of colocation facilities to international standards are not available in China. There is very limited real choice and an absolute lack of quality supply. Difficulties in securing IDC/ISP value-added telecommunications licences mean than an almost negligible number of non-Chinese organisations control licences directly and consequently the limited others who operate do so through licences controlled by often undeclared local partners – presenting auditability and business continuity risks.

The scale of the market opportunity also means far greater emphasis needs to be placed on securing future scalability within contiguous and assured availability space to avoid fragmented and inefficient data centre facilities being an inevitable consequence.  Lack of supply means this is hard.

The problem extends across sectors as all of the world’s leading cloud and tech companies have significant plans for China but find themselves unable to gain satisfactory access to international-standard data centres within which they can have effective operational influence or control. A new class of more business-focused data centre service providers is needed from which a new approach to data centre provisioning is offered which can meet these uncertain and fast-changing needs.

Particular challenges for any international or domestic entrant to the China market include:

  • Accessing suitable land, fibre, reliable power and water is hard and an iterative process
  • A grant of land use rights takes up to 18 months & is complex, requiring multiple permits
  • A Type 1(4) Value Added Telecommunications Services Licence is required
  • Local ‘enabling’ partners can be unsighted and can cause concerns over IP
  • Relationships with central and provincial government are complex
  • Concerns exist over State Security Agency requirements
  • Quality of construction output can fall way short of international standards
  • Programme assurance is limited due to wide ranging dependency on complex permitting
  • Operational management is generally poor: security, maintenance, access, communications
  • Fibre availability is limited and is often badly negotiated and consequently very expensive
  • Onshore (in-China) legal agreements are hard to enforce efficiently without corresponding offshore (in Hong Kong) commercial contracting structures

As Chayora, we are one of the very few non-Chinese business to have addressed each of the above. We will be very happy to share more detail when we meet.

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