Chinese Firms Continue Foray into Cloud Market in Southeast Asia Against Backdrop of China’s New Draft Data Security Law

On July 3, Huawei and Malaysia’s state-linked telecommunications operator, Telekom Malaysia, ™ signed a memorandum of understanding that calls for the integration of Huawei’s cloud infrastructure services into the Malaysian operator’s ecosystem of small and medium-size clients. As Malaysia’s only local operator with its own core data centers and full data residency (in compliance with Malaysia’s data localization regulations), TM is an attractive entry point for Huawei’s expansion into the Malaysian market. Per the MoU, Huawei is also expected to assist TM in developing Malaysia’s cloud artificial intelligence infrastructure.

The Huawei-TM agreement is also noteworthy in the broader context of other Chinese companies’ growing footprint in the Southeast Asian market for cloud services. This week alone, two other cloud cooperation transactions were initiated by Chinese companies in the region.

  • On July 3, Alibaba Cloud announced the formation of a cloud ecosystem alliance in the Philippines that involves over 20 local partners from varying industries. The initiative aims to integrate Alibaba Cloud services with over 5,000 local businesses.
  • On July 3, Alibaba Cloud also announced the planned construction of a third data center in Indonesia by 2021. This will coincide with the opening of Alibaba’s first data scrubbing center in the country, which is intended to protect users from cybersecurity risks.

Theses market forays arrive against the backdrop of mounting data security concerns associated with Chinese technology companies operating in foreign markets. On July 2, reports emerged that a draft law on data security is currently under consideration by the Chinese government that, if passed, could require Chinese companies to provide Chinese authorities with information about their network security architecture outside of China, on grounds of Chinese national security.  The law is expected to be enacted by 2021.