China Unicom entered into a joint venture with Alibaba Cloud (AliCloud) to provide application software services to government agencies and dip its toes into cloud business opportunities.
The venture — Yunli Zhihui Technology, which is roughly translated to Cloud Wisdom Technology — is registered in Beijing with $51.4 million worth of capital. China Unicom will hold a 51 percent stake in the company, and AliCloud will hold 34 percent. The remaining shares will be held by enterprise data platform Hangzhou Jiashiyun Network Technology.
The venture is part of a Beijing pilot program called mixed-ownership reform. It is set to deepen China Unicom’s own involvement in the reform, of which Alibaba has become a key investor. The Chinese government launched the program in 2015 to bring private-sector investment and management into state-owned companies. China Unicom joined in 2016. State-owned companies, in this case China Unicom, select a unit to participate and sell a stake to private-sector partners.
Both China Unicom and Alibaba have previously worked together as part of the pilot program. Last year, China Unicom raised $11.7 billion from Alibaba Group, Tencent Holdings, Baidu, and a number of other investors. The investors gained a 32.5 percent stake in China Unicom’s Shanghai Unit and were given board seats.
The joint venture will provide software to government institutions and enterprises and offer cloud and IT services. It will leverage China Unicom’s infrastructure and operational services for government and enterprise markets and Alibaba Cloud’s cloud computing, big data, and artificial intelligence (AI) capabilities.
China Unicom General Manager Liang Baojun will serve as chairman of the company, and Alibaba Cloud President Hu Xiaoming will act as the vice-chairman.
AliCloud has continued to make strides in competing with the global cloud providers. Recently, Synergy Research named Alibaba as the fourth worldwide in cloud leadership, and No. 2 in the Asia-Pacific (APAC) region — beat out only by Amazon Web Services (AWS). Gartner said it was the third-largest provider in terms of public cloud market share, though was the second-fastest growing at 62.7 percent in 2017.
It related China cloud computing news Google, which the same Synergy report ranked No. 4 in the APAC region, is reportedly in talks with Tencent, Inspur Group, and other Chinese companies to bring Google Cloud services back to China. It pulled its search engine and services from China in 2010 over censorship concerns. Google has yet to comment on these reports.
According to reports, Google intends to leverage domestic data centers and servers from Chinese providers to run its internet-based services. The company also intends to open a Google Cloud region in Hong Kong this year. This will be its first APAC region in China — the others being Mumbai, Sydney, Singapore, Taiwan, and Tokyo.
If Google is indeed seeking a cloud partnership in China, that will put it in direct competition with Alibaba Cloud whose large presence in China would be hard to topple. China is one of the largest growing markets for cloud providers; APAC itself has a growth rate that is 10 percent greater than worldwide growth, with China representing the highest growth in that region.
“There is no doubt that cloud providers who do well in China will automatically improve their standing in the Asia-Pac market and also the worldwide market,” said John Dinsdale, a chief analyst and research director at Synergy Research Group, of the Chinese cloud market.