ITOCHU Announces Execution of Memorandum of Understanding with affiliates of CITIC on Joint Establishment of Data Center Investment Fund

A fund will be formed to raise approximately 300 billion yen

January 15, 2019

ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Yoshihisa Suzuki, President and COO; hereinafter “ITOCHU”) announced today that it has executed a memorandum of understanding on the establishment of a new investment fund with affiliates of CITIC Group Corporation (headquartered in Beijing; Chang Zhenming, Chairman; hereinafter “CITIC”), with the objective of investing in infrastructure for data centers (hereinafter “DC”) in China.

In China, IT services such as video streaming services and video chat, which require broader network bandwidths and enhanced server processing capabilities, have been developing rapidly in line with an increase in the penetration of smartphones. In addition, data traffic is forecast to increase further, with a huge number of devices expected to be connected to the Internet due to the popularization of 5G technologies and IoT going forward. However, DCs are currently in short supply, although demand for DCs is expected to continue growing in future. The current market size of DCs is approximately 53.4 billion US dollars on a global basis, of which China accounts for approximately 13.7 US dollars, constituting a huge market. (*1)

In this market environment, ITOCHU has been working on the possibility of entering the DC business in China because, with operating companies that manage the DC business under its umbrella, ITOCHU is in a position to not only leverage its strengths, such as its extensive network with overseas DC operators, but also to take advantage of its investment record in overseas real estate funds in the real estate investment area.

The two parties will facilitate participation by investors both in Japan and abroad to respond to demand that is expected to remain strong in China going forward, by leveraging the mutual functions of ITOCHU and affiliates of CITIC, a strategic partner, and will work to form a fund to raise approximately 300 billion yen (initially 100 to 150 billion yen). In the long term, the parties will also start working in earnest on the possibility of establishing a DC infrastructure platform that includes DC development, fund raising and fund management with an eye on eventually listing as an REIT, and the possibility of operating a consulting business specializing in the DC business in China.

  • *1Reference source: Report on research on industrial development 2017-2018 by IDC, China.