China IT spend expected to be highest in 2010

Tech spending in China will reach US$216.7 billion by end-2010 as government places IT development highest on priority list, according to new Gartner report.
Written by Liau Yun Qing, Contributor

Consumer and enterprise spend on IT in China is expected to reach US$216.7 billion in 2010, a 5.9 percent increase from US$205 billion last year, according to a Gartner report released Friday.

The research firm noted that spending will be boosted primarily by the Chinese government's stimulus measures, with US$40 billion of the government's US$583.9 billion in funding expected to impact the IT industry from 2009 to 2013. The stimulus was issued by the Chinese government in 2008 during the financial downturn to support initiatives in infrastructure and public facilities, as well as organizations.

This year will see the highest level of spending over the five-year period as most stimulus policy measures and plans were finalized and executed in 2009. Uko Tian, Gartner's principal research analyst, said in the report: "[The government] has placed the development of the IT industry high on its lists of priorities and stressed the wide applicability of IT in economic and social fields. The fixed capital investment required is easier to obtain than other forms of financing."

According to Gartner, IT spending accounted for 6.1 percent of GDP (Gross Domestic Product) last year, however, this ratio will decrease slightly to 5.5 percent in 2013 as the IT market evolves and matures.

The telecommunications sector will grab the biggest share of overall IT spending in 2010, at US$158.2 billion, followed by hardware at US$43 billion.

Spending in the IT services and software industry segments are expected to account for a smaller proportion at US$9.4 billion and US$6.2 billion, respectively. However, these two sectors are expected to grow faster than telecommunications and hardware over the next three years, said Gartner.

The research firm added that, previously, China's IT economy had been driven by large verticals, but this will slowly evolve toward the consumer market.

Emerging technologies such as software-as-a-service, virtualization, cloud computing, unified communications and green IT are still low in priority among Chinese enterprises. However, Gartner said demand is rising and IT vendors should help their partners build skills around these emerging technologies.

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