The COVID-19 pandemic and digital transformation are driving the rapid growth of China’s public clouds market.

According to data from IDC China, in the first half of 2021, China’s IaaS and PaaS markets grew by 47.5% and 53.9%, respectively. The two sectors together grew by 48.6% year-on-year, which is lower than the 53% growth rate in the same period last year, but it is still global The highest growth rate.

Alibaba Cloud is in a leading position in these two market segments, with nearly two-fifths of the market share. Huawei and Tencent compete for the second place in IaaS and PaaS, with a share of about 11%, while China Telecom ranks fourth in both areas. Other participants, including China Mobile, China Unicom, Baidu Smart Cloud and JD Cloud, account for about a quarter of the total market share.

IDC stated that the competitive landscape of IaaS and PaaS in China remains stable. The three leaders of Alibaba, Huawei and Tencent have hardly changed, and together account for 60% of the overall market.

IDC China Public Cloud Research Manager Julia Zhuge said that the market is evolving from infrastructure competition to competition for full platform capabilities. She said that in order to improve competitiveness, cloud companies are investing in IaaS infrastructure, internal chip development and stronger PaaS capabilities, such as data processing and cloud native services.

The driving factor of this rapid growth is the pandemic and the acceleration of digital transformation that it has triggered. At the beginning of this year, the State Council of China introduced new incentives to encourage the use of cloud and new ICT to promote manufacturing and the digital economy. Analysts said that cloud computing has become the foundation and hub of digital transformation. In this context, governments and enterprises have huge demand for cloud services and a huge market space.

Among telecommunications companies, China Telecom is the most aggressive. Last year, it announced its “cloud and digital transformation” strategy, placing cloud functions at the center of its business. In July of this year, it established a dedicated cloud subsidiary with a capital of 900 million yuan, combining the nation’s cloud operations and R&D departments. Observers pointed out that the key reason for this move is not so much to focus on operations as it is to attract talents. Compared with China Telecom’s strict salary system, the new department can provide a wider range of performance-linked incentives.

China Telecom’s cloud business is included in multiple business lines, including industrial digitalization, which increased by 16.8% to 50.1 billion yuan in the first half of the year, and Tianyi cloud services, which doubled its revenue to 14 billion yuan in the first half of the year. China Mobile revealed at the recent annual partner conference that public cloud revenue reached 14.8 billion yuan in the first three quarters, an increase of 118% over 2020.