Boston, MA -- (ReleaseWire) -- 03/13/2014 -- There are a range of factors that make China's IT market very attractive with strong growth prospects including the size of population, rising incomes, relatively low penetration of products and solutions and a supportive policy environment. IT spending growth in China is expected to outperform on a regional and global basis, with a CAGR of 9.7% forecast 2014-2018 as IT spending increases as a share of GDP. However, China's IT market is not without its challenges as the pool of first-time buyers diminishes and vendors struggle in the face of high levels of piracy, cyber security issues, intense competition and price-sensitive consumers. The outlook is positive overall, but as China develops, its IT market evolves and vendors offering tablets and hybrids/convertibles and services firms with strong cloud computing product portfolios are expected to outperform.
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Headline Expenditure Projections
- Computer Hardware Sales: CNY533.1bn in 2013 to CNY585.4bn in 2014, +8.1% in local currency terms. The change in consumption mix from desktops and notebooks to cheaper tablets is limiting increases in market value, though unit volume growth is sustained.
- Software Sales: CNY114bn in 2013 to CNY123.2bn in 2014, +9.8% in local currency terms. Modernisation initiatives by the public and private sector will drive demand for enterprise software, while the process of informatisation among the vast pool of SMEs will also be an area of strong growth.
- IT Services Sales: CNY185.5bn in 2013 to CNY211.0bn in 2014, +13.8% in local currency terms. China is a large outsourcing market and we expect outsourcing activities to increasingly be geared to high value activities such as software development over the medium term.
Key Trends And Developments
In late 2013 the Communist Party announced a series of reforms for several areas of the economy that will take place through to 2020. Major reforms include urbanisation development, strengthening institutions and reform of the one-child policy, all of which are expected to boost growth and increase private sector confidence in the IT market. Wider support for the service sector and modernisation of state-owned enterprises, including finance, telecoms, healthcare, education and professional services (ie call centres) will be the most important reforms for boosting the IT sector, with software and services well placed for faster growth. There have also been minor changes in regulations for the ICT market including relaxation of restrictions on games console sales and allowing foreign investment in the mobile VAS market, which bodes well for further liberalisation over the medium term.
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