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Tencent to invest US$70 billion in new digital infrastructure

Chinese internet giant Tencent Holdings plans to invest 500 billion yuan (US$70 billion) over the next five years in new digital infrastructure, a major hi-tech initiative that would bolster Beijing’s efforts to drive economic recovery in the post-coronavirus era.

That massive investment will focus on fields that include cloud computing, artificial intelligence (AI), blockchain technology and Internet of Things, as well as the infrastructure to support them like advanced servers, supercomputers, data centres and 5G mobile networks, according to an announcement on Tencent’s official WeChat account on Tuesday.

Shenzhen-based Tencent’s new digital infrastructure programme followed its move to raise fresh capital for general corporate purposes. The company plans to issue medium-term notes, with a maximum limit of US$20 billion, to certain professional investors, according to its filing with the Hong Kong stock exchange on Monday. It said US$12 billion of these notes were already outstanding.

The company’s infrastructure programme includes development across the country of a new network of large-scale data centres, with a million servers deployed at each site, according to the company’s WeChat post. That would follow the company’s construction of its largest data centre complex on a 51-hectare site, which includes more than 30,000 square metres of tunnelled areas inside a 100-metre-high hill, in southwest Guizhou province.

Citing an interview of senior executive vice-president Tong Taosang with state-owned newspaper Guangming Daily, the Tencent post said the company will also escalate collaborations with “internal scientific research experts and laboratory resources at top universities” to cultivate talent, tackle scientific issues and take part in the formulation of industry standards.

A Tencent representative said the company does not have any further details to share beyond its WeChat post.

The latest initiative by Tencent, which runs the world’s biggest video games business by revenue and China’s largest social media platform, represents a strong commitment from the nation’s hi-tech sector to support economic recovery, following the disruptions caused by the Covid-19 outbreak across the country and around the world.

“This new infrastructure is set to play a more important role amid the global economic slowdown, the disrupted supply chains as well as weak domestic and foreign demand,” said Pang Ming, head of macro and strategic research at China Renaissance Securities. He indicated that the scale of new digital infrastructure investments could grow larger, as more companies pursue a similar strategy as Tencent and invest in data centres, AI, advanced communications and other hi-tech programmes.

Such moves would follow the direction set by Premier Li Keqiang last Friday, when he announced details of the Chinese government’s fiscal stimulus package of nearly 3.6 trillion yuan at the National People’s Congress. Beijing will also issue 1 trillion yuan of special treasury bonds for the first time since 2007 as part of that programme.

In March, Tencent’s Tong highlighted the company’s intent to “explore the value of digital infrastructure” across different industries.

Tencent already ranks among nine major tech companies in the world that are driving the future of AI and development of critical digital infrastructure, according to a recent report by American think tank Future Today Institute. The other firms are Google, Microsoft Corp,, Facebook, IBM Corp, Apple, Baidu and Alibaba Group Holding, the parent company of the South China Morning Post.


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