China remains one of the most strategically important and tightly regulated data centre markets in Asia. Strong domestic demand - driven by AI adoption, cloud growth and digital transformation - continues to support large-scale infrastructure investment.
To explore settings in other jurisdictions visit our APAC Regulatory Guide.
Sources: Worldometer, Statista, Cushman & Wakefield, Cushman & Wakefield
At the same time, operators must navigate complex challenges, including strict data localisation rules, cybersecurity obligations and foreign investment restrictions.
Government policy is a double-edged sword: while regulatory hurdles are high, supportive initiatives like ‘East Data, West Computing’ and green infrastructure mandates offer clear incentives for aligned operators.
However, escalating US export controls on advanced chips and technologies are adding pressure to high-performance data centre buildouts, particularly for AI and hyperscale workloads.
Spotlight on key drivers
Navigating data localisation requirements
China enforces some of the world’s most rigorous data localisation and cross-border transfer controls.
This is through the Personal Information Protection Law (PIPL), Cybersecurity Law (CSL) and Data Security Law (DSL). And it is especially the case for the operators of critical information infrastructure (CII) and entities handling ‘important data’.
These rules have compelled many multinational companies, such as Apple, to localise infrastructure, driving demand for compliant, onshore data centres.
Foreign investment restrictions
China maintains strict foreign ownership limits on data centre operations, particularly in relation to value-added telecommunications services (VAS).
This includes internet data centres (IDC), broadly defined to capture services including:
- hosting
- proxy maintenance
- system configuration
- server management and network-related services via outsourcing or leased data centre facilities), and
- cloud services.
Foreign investors (excluding qualified Hong Kong and Macao entities under the Closer Economic Partnership Arrangement (CEPA)) are generally capped at 50% ownership and face licensing barriers, such as ineligibility for the B11 VAS licence.
These restrictions limit direct market access for international operators, often necessitating joint ventures or partnerships to enter the Chinese market.
US export controls
US export restrictions on advanced semiconductors and AI-related technologies have directly impacted the availability of high-performance chips and servers for use in Chinese data centres.
These controls limit China’s access to critical components from leading US and allied suppliers, affecting build-out timelines for AI and hyperscale infrastructure.
As a result, data centre investors in China must navigate increasing technology sourcing risks and compliance uncertainty, particularly for GPU-intensive applications.
'China’s initiative to rapidly expand its data centre infrastructure driven by digitalisation and AI demand with a strong focus on green energy integration presents companies with substantial opportunities in energy-efficient solutions.'
KWM Partner Susan Ning
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Unlocking opportunities and navigating challenges