China's IT Market: More Room to Grow

Despite some international economic softness, China's IT market will remain robust for 2013, according to several reports.

Although Forrester Research Inc. has revised its projections downward for next year, China's IT growth will still hit double digits and will stay one of the fastest growing markets in the world.

Recently, Forrester revised its 2012 growth forecast down from 13 percent in January 2012 to 10 percent (measured in local currency). With $105 billion in annual technology spending, China ranks third in the world after the US and Japan. "However, per-capita IT spending in China is only 4 percent of Japan's and 3 percent of the US's -- highlighting the long-term potential in the country, " according to Forrester's Bryan Wang's blog post.

By area, computer equipment and peripherals, which represents the largest segment for tech spending in China, will grow 8 percent this year and increase by 13 percent in the coming year. Wang says that while Chinese customers continue spending on more hardware, there's momentum in the country around cloud computing, which could "drive significant new data center investments from telecom operators and local governments, with a positive impact on technology vendors selling servers, storage, networking, and other relevant technologies."

Also, new high-speed railway projects in China -- to the tune of $159 billion worth of pending projects restarted in 2012's second and third quarters -- will mean large-scale investments in things like control systems, new datacenters, train cars, stations, and ticketing systems, Wang writes.

Other segments that could see a boost are in healthcare, K-12 education, and banking, given some of the reforms slated countrywide.

Another firm, Gartner, says high IT spending could also spark adoption of other new technologies in the next decade. Having seen IT spending by Chinese end-users, mainly organizations and consumers, increase 14 percent in 2011 (compared to about 5 percent in the US), Gartner expects to see IT spending by Chinese end users to rise from $277 billion in 2011 to $312 billion in 2012, up about 12.6 percent. Jim Longwood, research vice president at Gartner, said:

Despite the worsening impact of the global economic downturn affecting both local and multinational companies in China in the first half of 2012, the Chinese government's 12th Five Year Plan, which began in 2011, will continue to influence the IT initiatives of Chinese enterprises through 2015. The consumerization of IT will also continue to have a strong impact in China, which has the world's largest number of Internet users and mobile handsets, the largest PC market, and the second largest hardware market.

Longwood added that the high growth in IT spending -- especially for hardware -- is typical of emerging economies. However, now that people are starting to see the tangible value of software packages, this could spark more software buys, outsourcing of IT relationships, and widespread implementation of ERP and supply chain execution platforms.

Like Forrester, Gartner sees personal cloud and platform-as-a-service offerings fueling new demand from mass-market consumer-driven technologies, and general cloud computing could pave the way for more open-source software, shared services, smart cities, and green IT/sustainability development.

So even as China experiences softness, like many other countries battling the Great Recession, it seems that the IT sector will still be a cloud with some silver lining.