Tian says he got the idea for Cloud Valley three years ago during conversations with two of China’s other Internet luminaries, Yahoo cofounder Jerry Yang and Trend Micro cofounder Steve Chang. Cloud computing was the next wave for China to catch, they advised.

With an initial investment of $78 million, China Broadband Capital, the company Tian now chairs, provided seed funding for nine startup companies working on different links in the cloud computing supply chain. One, China Supercloud, has already begun selling Chinese-designed servers that compete with those from IBM; other firms are designing software or developing designs for data centers. Tian expects all the companies will become profitable.

The companies are housed together at an office park in southeastern Beijing’s Economic and Technological Development Zone; the facility opened in August 2010. “It’s important to put all the entrepreneurs together to share ideas, and to put capital behind that,” says Tian. “When you walk through the cafeteria—the food is free—you can feel that excitement of young entrepreneurs.” Smaller branch campuses of Cloud Valley have also opened in the last year in Shanghai, Nanjing, and Shenyang.

China’s use of cloud computing services still widely trails that of other countries. A 2010 survey by the consulting firm Accenture found that only 11 percent of large organizations in China had deployed any kind of cloud technology, compared with 42 percent in the United States and more than 60 percent in France and Germany.

One obstacle is the slow speed of the Internet in China: painfully sluggish connections are common and poorly suited to real-time business needs. The structure of the Chinese Internet is part of problem, says Reuven Cohen, founder of the cloud service provider Enomaly. The network isn’t well integrated and is prone to interruptions. In addition, says Cohen, continual government monitoring slows down “even the most routine of Internet activities.”

Security concerns are another obstacle to building the cloud in China. The government could restrict applications if they become channels for prohibited political ideas. And foreign companies may be reluctant to store sensitive data on any Chinese server. “Perceived risk is a major barrier,” says Dale Sartor, an engineer at the U.S. Department of Energy’s Lawrence Berkeley National Labs, who has visited several large data centers in China. Users “must rely on, and trust, the service provider—a scary proposition for many who prefer direct control over their critical information and business resources.”

Tian is accustomed to responding to such worries. “This is almost always the first question people ask about the cloud: how safe is your information?” he says. But he plays down the fears. “With every technology revolution, you create a new set of problems. But you must compare that with the efficiency and convenience that the new technology brings.”