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China is already the second largest economy in the world and some believe it will eventually be the biggest one day. Given how large China's market is, President Trump has pushed for fairer trade standards and for the government there to open more markets. One potential concession made by the Chinese government is potentially the cloud. According to the Wall Street Journal the government has proposed potentially allowing 'trial operations of foreign cloud-service providers' in a move that could provide America's tech companies with greater access to China's cloud computing market. Let's find out how the smart money (hedge funds and elite institutions) is playing the Chinese Cloud trend.
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In terms of the potential Chinese concession, existing American cloud leaders such as Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) could potentially pick up more business from China. Amazon's current cloud operations in China are not that meaningful. Microsoft is known more for its Windows and Office software than Azure in China. Given Microsoft's connections with Chinese enterprise, the company could potentially have a leg up versus Amazon, which doesn't have as much of a presence in the country.
Currently, according from Microsoft,
According to the China Telecommunication Regulation, providers of cloud services—infrastructure as a service (IaaS) and platform as a service (PaaS)—must have value-added telecom permits. Only locally registered companies with less than 50 percent foreign investment qualify for these permits.
Investors of both companies hope that the government could allow for more ownership of cloud operations in China.