ArrowArtboardCreated with Sketch.Title ChevronCrossEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

Citic and Itochu to jointly finance data centers in China

Investment fund to address lack of such installations ahead of 5G era

Data center demand is rising sharply in China as its tech industry grows.   © Reuters

TOKYO -- Chinese conglomerate Citic will establish an investment fund in Singapore with Japanese trading house Itochu for building data centers in China, where there is a shortage of the facilities.

The two companies agreed Monday to set up what appears to be the first investment fund focused on data centers in China. It will lease data center facilities to Chinese information technology companies and distribute the rental income to investors.

The fund will start out with investments from the two companies that are launching it as well as from financial institutions, with a goal of raising 100 billion yen ($924 million) in a few years. The plan is eventually to take the fund public and put it on the scale of a few hundred billion yen.

China's information technology industry has been growing rapidly, aided by the rise of such big players as Alibaba Group Holding and Tencent Holdings. From 2010 through 2018, data transmission volume in China multiplied by 60, while centers to run servers for data analysis and management increased only ninefold.

Setting up a data center costs around $100 million per building. Many tech companies balk at the cost of building the facilities themselves in the face of China's high interest rates, hence the fund.

Itochu, which owns data center management unit Itochu Techno-Solutions, will offer design know-how in such areas as air conditioning and in-house power generation to help make the facilities energy-efficient.

Citic will handle land acquisition and construction in such locations as the outskirts of Beijing, Shanghai and Guangzhou. Chinese law prohibits a foreign company from managing a data center in China, so Itochu will focus on fund management. As China advances toward the introduction of 5G data, Itochu hopes the fund will help develop its other Chinese operations.

In 2015, Itochu invested 600 billion yen in Citic. So far, joint projects in such fields as offshore wind power and apparel have been relatively limited. In November 2018, Itochu was forced to take a 143 billion yen loss on a drop in Citic's share price. The partners have been seeking new ways to reinvigorate their ties.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media