Foreign investment in China’s Cloud Industry: A Case Study of Microsoft Azure’s Expansion

Abstract

Cloud computing is a transformative technology that offers a novel approach to utilizing computing resources. These resources no longer need to be physically located within a company's premises; instead, they can be accessed over the internet in a flexible and scalable manner. With its high level of digitization, China plays a pivotal role in developing cutting-edge technologies, and its vast market has consistently attracted investments from international corporations, including cloud service providers. However, one of the primary challenges that foreign cloud service providers face when entering the Chinese market is ensuring compliance with all the regulatory requirements established by Chinese authorities. This thesis delves into the legal framework governing the cloud industry in China from the perspective of a foreign provider seeking entry into the Chinese market. In the first chapter, we will present the subject in general terms, providing a precise definition of what cloud computing is and outlining the main service and deployment models. The Chinese regulatory framework will be examined, including the legal classification and licensing system for cloud service providers, as well as data governance and compliance requirements. In the second chapter, our attention will shift to foreign investors seeking to expand into the Chinese cloud services market, introducing some of the most prevalent investment strategies employed by foreign investors to navigate compliance and, in some instances, skirt government-imposed restrictions, sometimes pushing the boundaries of legality. Finally, Chapter 3 will present a case study involving one of the world's leaders in the telecommunications and information technology sector, Microsoft. We will analyze the path that led the multinational company to expand into the Chinese market focusing on the commercial relationship with its Chinese partner, VNET Group. Upon completing this thesis, readers will gain a comprehensive understanding of the primary factors influencing the cloud services business in China. They will also be able to identify common legislative patterns within the Chinese system and explore viable alternatives that foreign companies can adopt to thrive in the Chinese cloud industry.