China’s quest for asymmetric dominance in data centers

In a world where data is the new oil, data centers are the new refineries. As China takes advantage of this growing sector and investment theme, Chinese companies, supported by the Chinese government, have become major players in building the global data center layout, including those being invested in by the United States and other Western funds. China’s digital strategy generates opportunities for international investors as well as rapidly growing physical support for downstream digital development, but it also generates geopolitical risks that may undermine these economic opportunities.

The Chinese government’s approach necessitates scrutiny. If any one country disproportionately controls global data, it will claim outsize global power. Therefore, if any one country disproportionately controls the global layout of data center infrastructures, it will claim outsize global power. This reality will not be overlooked in the US and among its allies as they seek to respond to Beijing’s global ambitions to limit its own data exports while incentivizing partnerships that bring data within China’s borders. That in turn is likely to translate to restrictions on companies looking to do business with Chinese data center constructors, store their data in Chinese data centers, or even localize their own data in China.