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Tencent, Baidu gain ground on Alibaba as China’s cloud market expands at rapid pace

China’s cloud infrastructure market grew 66.9% to USD 3.3 billion in the fourth quarter of last year.

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Chinese tech giants Tencent Holdings and Baidu are gaining ground in China’s fast-growing cloud infrastructure market, although Alibaba Group Holding still leads the sector by a wide margin.

Tencent Cloud’s share in the country, the second biggest cloud market in the world, grew to 18% in the fourth quarter of 2019, behind Alibaba, which accounted for 46.6% of the total spend as the biggest cloud service provider in China, according to a Canalys report last week.

Tencent is gradually catching up with the leading player. In the first quarter of last year Alibaba and Tencent accounted for 47.3% and 15.4% of the market, respectively, a report by Canalys in June showed.

Baidu’s AI Cloud moved into third place with an 8.8% share in the fourth quarter, up from 8% and fourth place in the first quarter of 2019, behind Alibaba, Tencent, and Amazon.

China’s cloud infrastructure market grew 66.9% to USD 3.3 billion in the fourth quarter of last year, which accounted for a 10.8% share of the global total. For the full year, China’s spending on cloud infrastructure services increased 63.7% to USD 10.7 billion.

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The cloud market in China is expected to receive a boost this year after major players rushed to offer cloud capability to keep the country operational during the coronavirus outbreak, helping to move government, business, and educational services online.

The outlook is positive for 2020 because organizations will assess their business continuity measures after the health crisis is over, with a view to shifting more applications to the cloud, Canalys said.

“The benefits of cloud computing were demonstrated by the leading cloud service providers in response to the escalating coronavirus crisis,” said Canalys senior analyst Yih Khai Wong. “They rapidly deployed continuity measures for organizations and established resource-intensive workloads to analyze vast data sets.”

“Cloud companies opened their platforms, allowing new and existing customers to use more resources for free to help maintain operations,” Wong said.

However, Tencent also warned of the negative impact of the coronavirus outbreak. “The COVID-19 pandemic is delaying customers’ implementation of cloud-related initiatives and will thus negatively impact our near-term cloud services revenues,” the company said when it reported earnings last Wednesday.

“We believe enterprises will be increasingly keen to adopt cloud-based solutions over the longer term, in order to facilitate remote working and remote interactions with their customers,” Tencent said.

The company reported 17 billion yuan (USD 2.4 billion) in cloud services revenue and 1 million paying customers for 2019, the year after shifting its focus to enterprise-facing businesses, including cloud, from consumer products including games and social media.

Alibaba is the parent company of the South China Morning Post.

This article first appeared in the South China Morning Post.