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.