Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') in conjunction with LeadLeo released the '2025 Research Report on Cloud Computing Services Adopted by Foreign-funded Enterprises in China'. The research theme of this market report is on the localized cloud services adopted by foreign-funded enterprises in China, focusing on global consistency of IT architecture and technology stacks, localization adaptation, construction of local digital ecosystems, security compliance, multi-cloud management, etc., with a research period from the second half of 2024 to the first half of 2025. This research project is mainly targeted at cloud providers. We focus on sorting out the product capabilities and service capabilities of service providers, judging the competitive situation, and making speculations or predictions about market development prospects from the dimensions of value creation and technological development.
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The number of foreign enterprises establishing businesses in China and the scale of actual foreign investment have grown faster than before the pandemic. They have optimized their industrial structure in China and actively participated in China's digitalization drive. The Chinese government has relaxed restrictions on foreign investment access in high-tech and digital infrastructure fields, attracting about 21% of global transnational direct investment in 2023.
After the end of the COVID-19 pandemic control phase, foreign investment in China's business environment resumed growth, with momentum even exceeding that before the pandemic. Foreign investors mainly participate in industries targeting end consumers in the tertiary sector; with the rapid development of China's technology manufacturing industry, foreign enterprises have increased their investment in high-tech industries in China. From an industry perspective, foreign investors tend to favor high-end manufacturing industries.
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As of the end of 2024, the total number of foreign-funded enterprises established in China has reached more than 680,000. Affected by the COVID-19 pandemic, the number of new foreign-funded enterprises in 2022 decreased, but in 2023, foreign investors' enthusiasm for entering China has once again increased.
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Foreign investment in China is mainly concentrated in the tertiary industry. In 2023, the amount spent on the tertiary industry was more than twice that of the secondary industry, indicating the importance foreign investment attaches to China's consumer market and service market. At the same time, compared with previous years' data, the proportion of foreign capital participating in the development of China's secondary industry has been increasing year by year.
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Foreign investment in China's high-tech industries has been increasing year by year, with the growth rate of investment in 'high-tech manufacturing' exceeding that in 'high-tech services'.
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In 2023, in addition to enterprises originating from Hong Kong (China), Macau (China), and Taiwan (China), foreign investors establishing new businesses in China still mainly came from the United States, Singapore, South Korea, Japan, and other countries.
Since 2020, the negative list of China's foreign investment access management has shown a trend of gradual relaxation. The 'Market Access Negative List (2025 Edition)' has further reduced the number of items on the negative list to 106 (117 in 2020, 151 in 2018). The Chinese government has optimized the structure of foreign investment access, increased openness to emerging industries, and relaxed restrictions mainly in manufacturing (IT equipment manufacturing, automobile manufacturing, pharmaceutical manufacturing, biotechnology manufacturing, etc.), telecommunications services, and finance. At the same time, it has strengthened supervision over key areas of national security, adding new restrictions on areas such as e-cigarette production, drone manufacturing, and online drug sales.
Source: Frost & Sullivan analysis, LeadLeo research institute
02
Considering the differences in business deployment links (R&D, manufacturing, consumer services, content interaction, etc.) of foreign-funded enterprises in different industries in China, there are key differences in cloud service demands.
The business focus of foreign investors in different industries in China varies, leading to differences in their core cloud usage demands. For instance, foreign enterprises in the fields of intelligent manufacturing and life sciences set up factories, invest in research and development, or produce and manufacture in China, involving sensitive business data storage, transmission, and processing. They attach importance to the reliability of cloud service providers' infrastructure in China, the consistency of global IT architecture and technology stacks, and the ability to manage the entire lifecycle of data. For foreign enterprises in industries such as consumer goods, retail, and culture and tourism, their business focus in China is on serving consumers, requiring the construction of localized content platforms and interactive platforms to reach Chinese consumers. These enterprises place greater emphasis on the ecological resources, market resources, and localized digital marketing tools that cloud service providers can provide in China.
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Overall, foreign-funded enterprises need to deeply consider the design of top-level IT architecture when deploying digital systems in China. In this process, the comprehensive needs for cloud services focus on globally consistent IT architecture and software systems, a globally consistent technology stack, high-performance low-latency network connections, secure and efficient data transmission and processing, full compliance, the resilience and sustainability of cloud services, and the cloud service ecosystem.
Source: Frost & Sullivan analysis, LeadLeo research institute
About Multi-Cloud DeploymentAccording to a survey by Frost & Sullivan in the first quarter of 2025, over 80% of foreign companies in China choose two or more cloud service providers, leveraging the strengths of different cloud service providers in China to select corresponding cloud instances, data analysis tools, and other products. Among them, foreign companies that choose a multi-cloud combination of a local cloud service provider and an international cloud service provider account for more than 60%.
About Hybrid Cloud DeploymentOver 80% of foreign-funded enterprises deploying R&D, production, and manufacturing operations in China choose hybrid cloud deployment solutions. They store and process critical R&D and production data on their own local data centers (On-Premises), while handling and transmitting non-production data through public cloud platforms.
We believe that adopting a multi-cloud deployment strategy that combines local clouds with international clouds can help foreign enterprises effectively address challenges brought about by internal and external environments. On one hand, by leveraging the digital capabilities and resources of international clouds at home and abroad, gradual system migration and transition can be achieved to support unified management of subsidiaries by international headquarters. On the other hand, by building online touchpoints in the Chinese market using local clouds, access to suppliers, partners, and downstream users in China can be improved, enhancing the sustainability of long-term business development in uncertain environments.
Source: Frost & Sullivan analysis, LeadLeo research institute
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In terms of cloud usage, foreign-funded enterprises face multiple challenges, including technical and service aspects. At the technical level, cross-cloud feature operations do not always achieve the expected results. At the service level, there may be differences in service processes and models between the international teams and local teams of cloud service providers.
● Lower interoperability between different clouds
Given the impact of factors such as network latency and firewalls, international versions of software and applications may not be usable in China. Foreign enterprises need to adopt alternative localized digital products. Moreover, different cloud service providers have significant differences in product and service logic and technical implementation, making it difficult for enterprise users to achieve a 1:1 replacement of functions and performance. For enterprises that are implementing production, manufacturing, or R&D in China, they need to fully consider the impact of technical component changes on their business at the initial stage of business system migration. If it involves key non-replaceable functional components, it is advisable to choose to build localized versions of international functions at a premium cost.
● Differences between global and China-based cloud service teams
Given the differences in cloud usage habits and characteristics of end-user groups between China's domestic and overseas markets, there may be differences between overseas and local teams of cloud service providers in terms of service mechanisms, service concepts, and service support. Foreign-funded enterprises in China need to conduct thorough preliminary research before making cloud selection decisions.
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Foreign investment is focusing on the manufacturing and digital service sectors in China, which highly coincide with the acceleration of cloud migration. Foreign enterprises have become one of the driving forces behind China's industrial digital transformation.
According to foreign investment statistics from the Ministry of Commerce, in 2023, the number of foreign-funded enterprises entering the Chinese mainland market exceeded 3,000, including those in leasing and business services, wholesale and retail, information transmission and information technology services, manufacturing, and scientific research and technology services.
However, from the perspective of actual foreign investment amounts, the sectors with the largest proportion are manufacturing, scientific research and technology services, leasing and business services, and information transmission and information technology services. The direction of actual investment reflects the importance attached by foreign enterprises to the technological manufacturing sector and digital service sector in the Chinese market, as well as their optimistic expectations for development.
Against the backdrop of a continuous decline in the proportion of the labor force population, the Chinese government has issued a number of standards and regulations related to the cloud computing industry, accelerating the pace of industries' 'going cloud, using data, and empowering intelligence'. The '14th Five-Year Plan' for the development of the information and communication industry, released by the Ministry of Industry and Information Technology in 2021, mentions that 'by 2025, three comprehensive industrial Internet platforms with international influence will be established.' 'The number of industrial enterprises going cloud and onto platforms is expected to double.'
According to a survey conducted by Frost & Sullivan on 150 Chinese businesses operating in the fourth quarter of 2024, the industries with the highest proportion of IT workloads migrating to public clouds are manufacturing, retail, information technology and services, e-commerce, automotive manufacturing, life sciences, culture and tourism, etc. In these sectors, more than 20% of their business systems are already running on public clouds. In the short term, the industries with the fastest growth rate in workload migration to the cloud will be retail, information technology and services, real estate, etc., with an average annual migration growth rate of over 10%.
By observing the progress of cloud migration in various industries in China and combining it with the characteristics of the key industry distribution of foreign-funded enterprises in China, it can be seen that the industry sectors where foreign capital has actually invested and those where businesses are accelerating the deployment of public cloud basically overlap, proving that foreign-funded enterprises have become an important driving force for the digital transformation of China's industries.
Source: Frost & Sullivan analysis, LeadLeo research institute
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Foreign-funded enterprises' cloud loads on different systems in China: The proportion of cloud migration for core business management systems shows a polarized trend. Business agility demands have driven the general cloud adoption of non-core market modules. However, core systems involving finance and supply chain are mostly retained in private clouds or hybrid architectures due to data sensitivity limitations.
Technology manufacturing industryThere is a clear polarization in cloud migration. Currently, the proportion of automated office systems and customer relationship management systems migrating to the cloud is relatively high, mainly due to the popularization of remote collaboration tools and real-time data analysis needs.
Automobile manufacturing industryCurrently, cloud migration is concentrated on non-core systems such as automated office and human resource management systems. However, due to the millisecond-level response of production control and the data master privileges of autonomous driving algorithms, manufacturing execution systems and product R&D systems in core production processes still rely on local deployment.
Consumer retail industryThe overall cloud migration is relatively mature, with almost all systems having a cloud adoption rate of 60% to over 90% by 2024, especially in data analysis and decision-making systems, mainly due to the industry's high dependence on customer demand analysis and real-time inventory management.
Media Culture and TourismThe high-migration systems are concentrated on collaboration and content management, with automated office systems and knowledge management systems accounting for 90% and 80% respectively in 2024. However, systems related to product research and development and manufacturing (such as product lifecycle management and manufacturing execution systems) are hardly used.
Life Sciences IndustryThe cloud migration of non-core systems is more advanced, with a high cloud adoption rate in customer relationship management and human resource management systems, mainly due to the widespread application of industry cloud platforms such as Veeva CRM. However, cloud migration involving R&D and production systems is relatively conservative, especially for manufacturing execution systems, where the cloud adoption rate in 2024 was only about 3%, mainly limited by regulatory compliance requirements for pharmaceutical production.
Overall, industries with high demands for real-time data interaction and user experience, such as automotive manufacturing, media culture and tourism, and consumer retail (especially smart terminals), have stronger motivation to adopt cloud computing in China in the long term. The non-core business support systems of these industries have achieved a high penetration rate, while decision support and business intelligence middle-platform modules are becoming the main force in cloud adoption due to the agility needs of the local market and the advantages of AI computing power intensification.
Source: Frost & Sullivan analysis, LeadLeo research institute
Frost & Sullivan, in collaboration with LeadLeo, conducted a multi-factor hierarchical assessment of the competitiveness of cloud service providers adopted by foreign enterprises in China based on two evaluation dimensions: core capabilities and user value. The assessment was carried out through seven major indicators: cloud infrastructure capabilities, cloud usability, consistency between global and local services, overall cloud security, certification and compliance ecosystem, localized service capabilities, and cost management.Based on the scores of 'Core Competencies' and 'User Value', Amazon Web Services and Alibaba Cloud are positioned in the leadership quadrant for local cloud usage among foreign-funded enterprises in China, while Azure and Tencent Cloud are in the satisfaction quadrant.
Amazon Web ServicesAmazon Web Services (AWS) collaborates with local partners to build secure and compliant cloud infrastructure in China, providing strong support for foreign companies' business consistency, architecture consistency, and digital transformation in China and globally. AWS focuses on cutting-edge technologies such as AI and big data, and through multi-level security protection and local compliance measures, assists foreign companies in meeting regulatory requirements. Leveraging its rich ecosystem and industry empowerment centers, AWS promotes digital upgrades across multiple industries.
Alibaba CloudAlibaba Cloud, with nearly 400 cloud and AI products, provides flexible and diverse technical support and localization services for foreign-funded enterprises in China, and collaborates with international partners such as Deloitte to strengthen data compliance. Alibaba Cloud supports minute-level elastic scaling and various computing architectures to effectively control IT costs. At the same time, it empowers enterprises' intelligent transformation with the Tongyi Large Model and the open AI ecosystem. In the next three years, it will invest more to strengthen AI infrastructure and global networks.
AzureMicrosoft Azure creates highly reliable and compliant cloud computing platforms for foreign companies operating in China. Its independently operated local data centers strictly comply with data sovereignty regulations and serve tens of thousands of customers in industries such as finance, manufacturing, and healthcare. Azure provides global infrastructure and flexible resource scheduling, supports mainstream operating systems and open-source technologies, and seamlessly integrates cutting-edge AI capabilities such as OpenAI to assist enterprises in efficient innovation.
Tencent CloudTencent Cloud provides flexible multi-cloud hybrid architectures and efficient network connections for foreign-funded enterprises in China, leveraging its cloud-native and edge computing collaboration capabilities to help enterprises achieve business elasticity and global collaboration. With its full-link AI platform and strong ecosystem cooperation network, Tencent Cloud supports localization customization for foreign-funded enterprises and the implementation of industry-specific solutions. It also continuously provides technical empowerment and service guarantees to enterprises through professional teams and developer communities.
