China Launches $1.7 Billion Data Center in Lhasa, Tibet

On June 7, China’s state-run media reported that a Tibet-based Chinese technology company, Ningsuan Technology Group (that, notably, has AVIC Trust as a shareholder), completed the first of three phases of construction on the Tibet Cloud Computing Data Center, marking the facility’s readiness to begin pilot operations.  Situated in China’s state-run Himalayan industrial park, the Lhasa Economic and Technological Development Zone, the $1.7 billion center is being touted as facilitating data exchange between China and neighboring South Asian countries.

The Lhasa data center arrives amidst increasingly heated debate in major data ecosystems about the need to protect domestic user data from foreign state-controlled enterprises (especially those emanating from authoritarian states).  China has said that the reason for locating the data center in Tibet is for it to serve as a bridge to buffer Chinese firms from incurring the high costs of operating local facilities in these markets.  This facility, however, would also seemingly permit Chinese firms to store foreign data within China’s jurisdiction.

Tibet is emerging as a critical bridge for the expansion of Beijing’s Belt and Road Initiative (BRI) to South Asia.  This role is perhaps most prominent with physical connectivity efforts under BRI that link China with Nepal and India via Tibetan road and rail infrastructure.  It appears, however, that Tibet is also being positioned to play a critical role in the regional expansion of China’s Digital Silk Road.

In 2018 — one year into the implementation of the Lhasa data center — Alibaba Cloud signed a framework cooperation agreement with Ningsuan Technology, the company building the data center in Lhasa, that seeks to integrate the data facility with Alibaba’s cloud computing infrastructure and other IT services.  Per the agreement, the two companies sought to build a “distinctive” AI cloud platform designed for business ecosystems for the Tibetan market, particularly for critical industries such as power, finance, defense, government, public security, and network communications.

In this context, it is noteworthy that South Asia has been specifically mentioned as among Alibaba Cloud’s target markets for foreign expansion.  Alibaba Cloud entered the Indian market in 2017.  The company operates two data centers in India and continues to compete actively for Amazon’s leading market share in the country.  In Nepal, Alibaba Cloud is among the country’s few cloud services providing services through local company, Telnet.

One of four shareholders in Ningsuan Technology Group, is state-owned AVIC Trust (3.1%) — the investment arm of AVIC Capital,  which is controlled by a state-owned aerospace and defense company.  AVIC Trust has invested in several internet data center (IDC) projects both at home and abroad in recent years, including through its 2018 acquisition of a stake in UK-based Global Switch – the world’s third largest independent data center operator.  This acquisition raised security concerns among  local authorities in the United Kingdom and Australia, where Global Switch owns two high-security data centers that house classified government information.

The Lhasa Economic and Technological Development Zone, where the center will be located, was launched in 2001 under the auspices of the Chinese Ministry of Industry and Information Technology.  The zone is separate into two sections, A and B, which are both strategically situated near key transport nodes in the region.  The Tibetan data facility is expected to be fully completed by 2026.