A year of… vast capacity growth, selective and enduring strategic-security controls
China remains a very significant but tightly regulated market. Strong domestic demand, driven by AI adoption, cloud growth and digital transformation, continues to support large-scale infrastructure investment.
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.
At the same time, operators must navigate complex challenges, including strict data localisation rules, cyber security obligations and foreign investment restrictions.
Escalating US export controls on advanced chips and technologies are adding pressure to high-performance data centre buildouts, particularly for AI and hyperscale workloads.
Data centre statistics provided by DC Byte.
Spotlight on key drivers
China enforces some of the world’s most rigorous data localisation and cross-border transfer controls.
These rules have compelled many multinational companies, such as Apple, to localise infrastructure, driving demand for compliant, onshore data centres.
China maintains strict foreign ownership limits on data centre operations, particularly in relation to VAS.
This includes internet data centres (IDC) – defined broadly to capture services including hosting, 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.
Nevertheless, there has been a gradual reduction of foreign equity ratio restrictions for several VAS, including IDCs, since 2024. By June 2026, over 160 enterprises obtained pilot approvals for numerous categories of VAS, including IDCs, internet access, online data processing, transition processing and information services categories.
US export restrictions on advanced semiconductors and AI-related technologies 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.
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