Chinese businesses to increase IT spending
By Vincent Lam (China Daily)
Updated: 2005-12-08 06:06

HONG KONG: Mainland enterprises are expected to increase their spending on information technology (IT) to improve their research and development (R&D) capabilities, according to a survey.

Visitors check laptops on show at a recent IT fair in Fuzhou, capital of East China's Fujian Province. It is predicted that mainland enterprises will spend US$62.3 billion on IT in 2006. [newsphoto]

Gartner, a global IT research company, predicts that mainland enterprises' spending on IT will reach US$62.3 billion next year. The figure could grow at a compound annual growth rate of 6.3 per cent from 2004 to 2009.

The spending in 2006 would reflect an 8.6 per cent year-on-year growth.

A total of US$41.4 billion is to be spent on telecommunication services and equipment, a 9 per cent increase over 2005; US$14 billion on hardware, a 5 per cent increase over this year; and US$5.2 billion on IT services, a 13.5 per cent increase.

"As research and development across the region gears up, we see intellectual property (IP) protection following suit. The percentage of gross domestic product spent on R&D is rising rapidly, particularly on the mainland. It is moving towards Organization for Economic Co-operation and Development levels," the survey said.

On a global basis, IT spending will amount to US$1.77 trillion in 2006, compared with US$1.7 trillion in 2005, Gartner said.

The increasing use of IT will provide the incentive for Asian companies with multinational intent to put additional pressure on their governments to enforce IP protection and support IP creation at home, the survey said.

The increasing proficiency, and the competence of developing software in English, will make the mainland a more competitive player in the global IT industry.

"The Chinese mainland will have the largest English speaking capability by 2008, with a significant impact on business and IT globally.

"Removing the language barrier will enable mainland companies to work in a wider range of markets and segments," said Dion Wiggins, vice-president and research director at Gartner.

"It will also result in more competition between China and India in the external service provider segment."

However, cultural barriers remain when it comes to developing software, even if language barriers are overcome.

"While English will become the preferred language of business in China, the context will remain in Chinese and the cultural barriers will remain. It is important for enterprises to recognize these barriers and address the issues they represent," added Wiggins.

Wiggins predicted that an upsurge in the number of people wanting to learn Chinese in the West would help communications.

As a result, Hong Kong, which has traditionally been the gateway to the mainland, will see a decrease in its importance in favour of Beijing and Shanghai.

The city has seen a decline in IT spending this year, Gartner said.

The figure may drop by 1.4 per cent year-on-year to US$6.6 billion in 2005.

(China Daily 12/08/2005 page10)