Ongoing global economic uncertainty has affected the Chinese economy by reducing demand for exports and shrinking domestic investments, resulting in turbulence in China’s tech market. My latest report, “China Tech Market Outlook: 2012 To 2013,” describes how Forrester has revised its 2012 growth forecast for this market from an original forecast of 13% in January 2012 down to 10% (measured in local currency). Major technology vendors, including both local and MNC vendors, have seen the growth of their China operations slow down.
However, the Chinese tech market is still one of the fastest-growing IT markets in the world. China’s $105 billion of annual technology spending ranks third in the world after the US and Japan. However, per-capita IT spending in China is only 4% of Japan’s and 3% of the US’s — highlighting the long-term potential in the country.
Some of the key findings for the tech market trends in China in 2012 and 2013 include:
- Computer equipment and peripherals, as the largest segment for tech spending in China, will grow 8% in 2012 and 13% in 2013. Chinese customers continue spend on more hardware. Strong cloud momentum in China will 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.
- The software market has continued to grow steadily in 2012, but growth will slow in 2013. With the completion of software legalization process for central government agencies, software purchases may slow down, as the use of illegal software in the private sector remains high.
- IT outsourcing growth will slow in 2012 but pick up in 2013. In the current economic climate, fewer organizations are implementing major IT outsourcing projects. Although many organizations are eyeing IT outsourcing as a way to reduce IT spending in the long term, immediate costs may go up in the transition period.
For 2013, Forrester expects new stimulus package from central and local government will drive investment in the following segments and therefore bring business opportunities for technology vendors:
- New high-speed railway projects. Approximately ¥1 trillion ($159 billion) worth of pending projects restarted in Q2 and Q3 2012. Large-scale IT investments in railway projects will include control systems, new data centers, train cars, stations, and ticketing systems.
- Healthcare and K-12 education. With healthcare reform, projects for electronic medical records and integration of health insurance networks will gain momentum. For K-12 education in rural areas, projects related to online and distance education will benefit from government investment.
- Other segments will grow strongly in 2013. The Chinese government is also encouraging the reform of city commercial banks and rural and urban banks. Higher demand for IT systems that support expansion has been seen across the country. The transformation in the retail industry is also creating significant opportunities in the online retail and logistics industries.