China's cloud market is entering a new competitive landscape and customer structure era, according to research firm Canalys.

Alibaba, Huawei, Tencent, and Baidu AI maintain control over 80% of China's cloud services market – which grew 8% year over year during the third quarter to $7.8 billion – however, these providers aren't the only ones looking to join the party.

Research Analyst Yi Zhang noted telecom carriers like China Telecom have begun investing in the cloud market and are actually gaining share against Chinese hyperscalers. That operator is approaching cloud by touting its scalable infrastructure costs and span of coverage, according to the report.

Though the market did continue to grow from last quarter's $7.3 billion, this marks the third consecutive quarter of slowed growth and the first time it's slowed below 10%. Canalys credits this to long-term operational impacts of the COVID-19 pandemic on Chinese enterprises that are pushing customers to scale back IT spending.

According to Canalys, "cost reduction remains a priority for enterprises. Even digitally-rooted customers with high cloud usage rates downsized their cloud consumption in Q3," and traditional verticals didn't increase their cloud demand enough to counteract that slowdown.

About 60% of the three major Chinese cloud providers' customers are from traditional verticals, and Zhang predicts "the Chinese cloud market will be driven by enterprise customers from traditional verticals" in the market's next phase. Cloud providers will likely still struggle to move the most traditional sectors to the cloud, including those with low digitalization levels, Zhang explained.

Alibaba emerged as the No. 1 cloud infrastructure services provider in Q3 2022 with 36% of total spend and 4% year-over-year growth. This quarter is the first that Alibaba's growth was in the single digits, which is in line with the market's overall position.

Canalys noted renewal execution drove much of the provider's growth because cloud consumption rates and deal sizes were both lower than it hoped, particularly in retail and internet industries.

No. 2 Huawei represented 19% of the market this quarter and grew at a faster rate than the overall market, which gave the provider extra market share. Canalys highlighted Huawei's launch of general cloud services aimed at small- and mid-sized businesses and noted that scalable model drove significant revenue growth for the vendor.

Tencent accounted for 16% of the cloud services market amidst a "phase of adjustment" for its cloud business. The provider has been focusing on scaling back projects that don't turn a profit, and "revenue growth is slowly returning," the report reads.

Baidu AI was No. 4 with 9% of Q3 spend and 12% year-over-year growth – a faster pace than the market as a whole. Analysts credit the provider's steady growth to its cross-industry customer structure that reduces reliance on a few key customers and its footholds in traditional industries like manufacturing, energy, and transportation.