Cloud Computing Zone Tests “Chongqing Model”

In March 2011, the municipal government of Chongqing announced its intention to construct a special economic “cloud computing zone” (yun tequ), the largest such zone in Asia (Nanfang Zhoumo, June 16). Not only will this initiative offer participating foreign companies with the unique IT services provided by the “cloud,” but it will also allow these companies to circumvent the “Great Firewall” that restricts the Chinese public’s internet access. Chongqing’s local government expects this endeavor to help attract foreign businesses, and moreover, that it will represent a new model for Chinese economic development.

Yet, cloud services and the purported internet freedom provided by the Chinese government give rise to questions about information security and the underlying intentions of the Chinese leadership. The cloud zone has come under fire both for its seemingly two-faced policy of allowing unrestricted internet for foreign companies only, and for its attempt to get foreign companies to store information in a facility run by a government reputed to steal sensitive data from foreign entities. In order to reinvent itself as a successful cloud computing hub, Chongqing’s government will have to convince foreign businesses that high-tech information services can thrive in an authoritarian socialist economy.

Attractions of the Cloud Zone    

Cloud computing allows for the outsourcing of a wide range of IT services. The fundamental aspect of cloud computing is that data storage and processing is done remotely, often by a third-party service provider. Data can then be stored remotely and software and processing power can be rented out as needed rather than requiring a large initial investment of infrastructure, allowing a cloud computing subscriber to essentially outsource its entire IT department. Cloud computing also allows companies to avoid issues of internet bandwidth and software licensing by outsourcing these issues to the cloud provider.

Chongqing’s government has advertised itself as willing to subsidize this type of cloud zone, and that translates into a large provision of ready-made IT infrastructure and services for any company willing to make the move (Forbeschina.com, June 17). Since larger companies often spend millions of dollars and significant manpower just to manage their email and other data systems, the cost savings delivered by a government-subsidized cloud zone like Chongqing’s would certainly be a compelling incentive.

Unrestricted internet access within the cloud zone would also be attractive to foreign businesses choosing a location to set up a local office in China, since within China’s “Great Firewall” censorship regime, access to ubiquitous websites like Google and Microsoft.com is often unreliable and can make even daily business operations arduous. Yet, provisions to escape the Great Firewall for foreign companies, larger Chinese companies and research institutions, and even savvy private citizens are nothing new. For years, anyone rich or well-connected enough can acquire a VPN (virtualized private network) from one of China’s official internet providers, establishing a direct link with the worldwide web and bypass Chinese censorship policy [1]. At least until recently, the ease and convenience of using a VPN left little reason to relocate to any kind of special zone like Chongqing’s.

In recent months, however, even these methods have become less dependable, with disruptions to foreign websites eroding the usefulness of VPNs. Not only do Chinese VPN providers have a financial disincentive to allow users to access foreign websites, since they have to pay for the foreign internet flow, but it may also be that Chinese web censors are clamping down on the VPN loophole in the Great Firewall (South China Morning Post, May 25). If this is the case and VPNs lose their allure, then the internet freedom of Chongqing’s cloud zone would prove itself more than just a publicity gimmick and begin to attract serious attention from potential subscribers.

In a vacuum, these features should be a significant draw for foreign businesses, but it remains to be seen if the advantages outweigh possible risks of signing up for an untested cloud provider overseen by a regional Chinese government. The snap-response of many pundits may be that no foreign business would trust the Chinese government with its data (Voice of America, June 21), but the issue is more complicated, and it may be that the reputation of the cloud provider and the zone’s location matter more than the trustworthiness of the Chongqing government. While the Chinese government’s attitude toward information security is certainly a factor, the stability of the service provider (as well as the area’s geological stability) may be what makes or breaks the deal.

The Risks of Chinese Clouds and Chongqing’s Geography

In the West as well, private cloud computing services give rise to questions of trust and information security. There is a limit to what can be safely stored in a cloud administered even by a reasonably trustworthy third party, because beyond just the possibility of data theft by an unscrupulous cloud provider, there is always a chance that data can be lost through accidents or natural disasters striking the data center, or through the sale or bankruptcy of a fly-by-night cloud provider.

Even in the most trusted cloud system, users make a conscious decision between what can be safely stored and what is too great a risk to expose to a third party. Cloud storage is a practical choice for data like corporate email, since email is already insecure and a well-informed user will not send critical information by email. Moreover, the loss of old email will not usually shutter a business. Sensitive financial data or intellectual property, on the other hand, are not good candidates for cloud storage, since any potential data theft or loss could cripple a business.

If even large Western cloud providers are not entirely trusted, to say nothing of smaller, less well-known Western cloud providers, do Chinese providers deserve to be trusted even less? Previous conflicts between Western companies and Chinese authorities over data security have left many in the West suspicious that the Chongqing cloud zone is nothing but a trap (Voice of America, June 21). Yet, even if the Chongqing government had the goal of stealing data, it would not have access to the kinds of data that were previously a target in the Google cyber break-ins. Storing data in Chongqing’s cloud may carry a risk, but companies will inevitably be discerning with what they put on the cloud, as they would with any cloud provider.

In any case, the dependability and reputation of the cloud provider should be of larger concern than the reputation of the Chongqing government. Chongqing’s government has designated PacNet, one of the largest telecom and data service providers in Asia, to provide the software and mainframes that will power the cloud zone [2]. While PacNet is relatively well-known in Asia, convincing American or European companies to subscribe to its services might be a tougher sell.

Issues of trust aside, the greatest risk of Chongqing’s cloud zone may be that it lies in a recently active earthquake zone. For obvious reasons, some companies may balk at the prospect of losing the entirety of their data if the cloud zone’s mainframes are destroyed in an earthquake. While this may not draw the same media attention as suspicion of an unscrupulous Chinese government, it is nonetheless a significant factor in the decision of companies to relocate. To successfully attract companies to participate, Chongqing’s government may have to demonstrate that its infrastructure is at least earthquake-resistant.

Chongqing Seeks a New Development Model

Chongqing may seem an unusual choice for a cloud computing hub, and its pursuit of a new special economic development zone would appear to reflect the ambitions of its leadership more than its current role in the Chinese economy. Chongqing has been a major manufacturing base for decades, but its production is aimed primarily at the Chinese military and, in more recent years, the Chinese middle classes, with 90 percent of its manufactured goods going to the domestic market [3]. As a result, Chongqing’s economy had one of the fastest growth rates in China since foreign demand collapsed in 2008, maintaining 14.3 percent growth when coastal China’s growth rate lagged [4].

However successful, Chongqing’s economy has in the past followed a middle-income industrial model. Its possibilities for expansion are also limited, since it is landlocked and would have difficulty pursuing the same export-driven growth path that coastal cities pursued before it. Today, Chongqing’s leadership, especially its ambitious Party Secretary Bo Xilai, would like to see it leapfrog ahead and become a model of a high-tech, international, service-driven economy. Since cloud computing is a perfect example of the foundation for a high-tech, service driven industry, Chongqing’s cloud zone can be seen as one of the first steps in making it an economic test zone, much like Shenzhen was in the early 1990s.

Yet the goal of the “Chongqing model” experiment is very different from that of the “Shenzhen model”. The Chongqing government believes in the merits of socialism rather more than is the modern Chinese norm, and envisions a strong role for the government in regulating the economy. Under Bo Xilai’s leadership, Chongqing has resurrected socialist welfare programs, a strong role for government in the economy and popular “red culture,” among other efforts aimed at restoring the “virtues of socialism.” Xi Jinping, the presumptive successor to Hu Jintao to become China’s next Party Secretary, is reportedly also a close colleague of Bo Xilai, and has seemingly endorsed the Chongqing model as a way forward for the Chinese economy (See “Xi Jinping’s Chongqing Tour: Gang of Princelings Gains Clout,” China Brief, December 17, 2010).

There are understandable concerns that this greater role for government may be at odds with the information freedom required for data processing in the cloud zone. While cloud computing is a perfect opportunity for a region attempting to develop its IT service portfolio, China has historically had little success with the industry as a result of its information control policies. China’s neighboring peers Singapore, India, and Malaysia have all had significant successes developing remote data processing services (a major component of cloud computing), but China has been noticeably absent from the party due to its strict controls on information flow (Nanfang Zhoumo, June 16).

Chongqing’s new commitment to cloud computing implies at least a certain tolerance for information freedom. Much like the modern Chinese economy as a whole, the Chongqing economic model is a mixture of conflicting strategies. The old Chinese model of economic freedom alongside social control, as represented by Shenzhen, has existed for over thirty years and displayed remarkable success. The Chongqing model seems to change the equation slightly, providing more economic regulation and at the same time less information control. The cloud zone appears to fit into this larger Chongqing model, but it remains to be seen what role the government plans to play in its administration. Bo Xilai and Xi Jinping seem to be trying to integrate the potentially conflicting priorities of creating a wider role for government in business and at the same time promoting industries that can only thrive with greater information freedom.

A Symbol of Something Larger?

On the surface, Chongqing’s cloud zone does not appear to offer anything novel to a foreign company looking to set up shop. Foreign businesses currently possess proven ways to escape China’s internet censorship, and companies like IBM have already blazed the trail of cloud computing in China [5]. Yet, the new cloud zone does offer itself as a milestone, and its sheer scale sets it apart. If successful, it could dampen suspicion that has been on the rise in recent years of the Chinese government’s attitude toward data privacy and foreign business. If the Chinese Communist Party (CCP) can go even further and encourage growth in new high-tech industries while retaining oversight and promoting Bo Xilai’s concept of “new socialist virtue,” then Chongqing could represent a significant step toward a viable new Chinese economic model.  
 
Notes:

1.    For more information on China’s VPN system see China Unicom’s VPN website: https://www.unicomamericas.com/mpls-vpn.html, and an independent report on China’s VPN market: https://www.reportsnreports.com/reports/75733-ip-vpn-market-forecast-in-china-to-2016.html.
2.     “Pacnet Joins New Cloud Computing Initiative in China,” March 2, 2011, https://www.pacnet.com/inter/index.asp?pg=about-pacnet_newsroom&view=singlenews&page=11&year=2011.
3.    Bo Zhiyue and Chen Gang, “Bo Xilai and the Chongqing Model,” East Asian Policy, 42-49, July 17, 2009. https://www.eai.nus.edu.sg/Vol1No3_BoZhiyueChenGang.pdf.
4.    Ibid.
5.     “Made in IBM Labs: IBM to Build First Cloud Computing Center in China,” February 1, 2008, https://www-03.ibm.com/press/us/en/pressrelease/23426.wss.