Report: China IT spending remains strong

Country will invest $51 billion on IT in 2009, with strong government and green spending, says analyst. Business process outsourcing, however, will take a hit.

Boosted by government initiatives and green spending, China's IT market in 2009 will only be minimally affected by the global economic slowdown, according to a new report from Springboard Research.

IT spending in the country will reach $51.2 billion in 2009, a year-on-year growth of 11 percent, the research firm said in a statement Friday. This is only 2 percent shy of Springboard's previous estimate of 13.1 percent growth, or $52.1 billion.

China's IT market growth, noted Springboard, has largely been protected by the financial crisis as its export industry, the country's worst hit sector, is not a key buyer of technology. China's huge domestic market and its "almost closed financial system" also play a part in helping the country cope with the market conditions, said Bryan Wang, Springboard's country manager for Greater China.

"Moreover, a strong government investment plan will boost spending in various economic quarters and help the Chinese IT market sustain its place as a shining star in the Asia-Pacific region in 2009," he added.

IT spending in China

Last November, the Chinese government announced a $585.2 billion stimulus package, which includes plans to invest over $290 billion on railway network expansion from 2009 to 2011. This, Springboard noted in its report, highlights the market opportunity for IT products.

IT expenditure in key verticals such as government, education, and telecoms will grow on the back of the government stimulus package, said Wang. According to the report, government-driven infrastructure spending will bolster a large portion of investment in the country in 2009, while IT expenditure relating to 3G wireless networks will also be a big area of spending for telecom operators in China in 2009. The banking and finance sector's IT spending will remain firm, but IT planners will exercise more caution in their purchases.

In addition, green IT will be fast-growing in China--the market for green IT products and services is expected to have a five-year compound annual growth rate of 71 percent to reach $447 million in 2011.

"Springboard Research believes the green data centers and related green IT services will become a hot area for these organizations in 2009," the report noted. "Enterprises will look to rapidly build out investments in green-field data centers, and this will also bring out the concept of virtualization and recycling with existing infrastructure, which is increasingly becoming a critical part of the investment moving forward."

Players in the business process outsourcing (BPO) market, particularly small and midsize independent software vendors, may be the most affected by the global financial crisis, Springboard said in its report.

Many Chinese BPO companies located in cities including Dalian and Shenzhen, have a majority of their businesses from overseas banking and financial institutions, it explained, adding that these providers' businesses would be affected in 2009 as a result of "very few" contracts secured in the second half of 2008.

Hong Kong and Taiwan, having been part of the global financial system for decades, would also be more affected by the global slowdown, Springboard added. The impact on Taiwan's IT expenditure would be more severe, as Hong Kong is expected to gain financial support from mainland China.

According to Springboard, the Chinese government's plans and policies will lead to a more stable IT market from the second quarter of 2009.

Vivian Yeo of ZDNet Asia reported from Singapore.

 

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