(JW Insights) Jun 16 -- China’s spending on cloud infrastructure services grew 6% year-on-year in Q1 2023, reaching $7.7 billion and accounting for 12% of global cloud spend, said a Canalys estimate on June 15.

Demand for cloud migration remained sluggish in China, with single-digit growth persisting for a third consecutive quarter.

Chinese enterprises are cautious with IT budgets in the wake of a drop in pandemic restrictions, which reduced the need for remote work and online meetings. The slowdown in cloud consumption by existing customers and limited cloud investments from new customers resulted in slow-downed China’s cloud market growth rate, said Canalys.

However, as ChatGPT sets off a wave of demand for AI, generative AI and AI Foundation Models are becoming highly sought after, and this is expected to unlock new growth opportunities in the cloud service market.

Enterprises in China have shown limited enthusiasm when it comes to cloud adoption, predominantly focusing on the operational cost benefits cloud brings. A number of Chinese cloud vendors recently announced price reductions for their cloud services, with the goal of lowering the entry barrier for cloud adoption.

More vendors are also starting to invest further in building cloud partner ecosystems in China. Cloud partners can help vendors cost-effectively access a wider customer base, particularly among small and medium-sized enterprises (SMEs).

The leading players in China’s cloud infrastructure market maintained their market positions in Q1 2023. Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu AI Cloud remain as the top four vendors. Together, they accounted for 79% of total expenditure in China, with an increase of 6% year-on-year, said Canalys.

While the focus on PaaS product portfolios has been increasing among many vendors since last year, China’s cloud services market is still dominated by Infrastructure-as-a-Service (IaaS). In Q1 2023, IaaS accounted for over three-quarters of the overall China cloud services market.