Gartner: IT Spending in China Will Reach $216.7 Billion in 2010

Spending on information technology (IT) by consumers and enterprises in China is expected to reach $216.7 billion in 2010, offering substantial opportunities for technology and service providers, according to Gartner Inc. This represents 5.9 percent growth from $205 billion in 2009.

Despite the recent global economic downturn, the Chinese economy grew 8.7 percent in 2009, with IT spending growing at 7.5 percent year-on-year. China's government responded to the downturn by injecting $583.9 billion in stimulus measures during the latter part of 2008, specifically addressing infrastructure and public facilities and organisations.

Gartner estimates $40 billion of this stimulus funding will impact the Chinese IT industry from 2009 to 2013, with the highest level of spending in 2010 as most stimulus policy measures and plans were finalised and executed during 2009. IT spending represented 6.1 percent of GDP in 2009. As the IT market evolves and matures, this ratio will decrease slightly to 5.5 percent during 2013.

"The Chinese government's focus on driving high levels of GDP growth will create favorable market conditions for the continued evolution of the IT industry in China,” said Uko Tian, Principal Research Analyst at Gartner. "It has placed the development of the IT industry high on its list of priorities and stresses the wide applicability of IT in economic and social fields. The fixed-capital investment required is easier to obtain than other forms of financing.”

The biggest area for IT spending in 2010 is expected to be telecommunications ($158.2 billion), followed by computing hardware ($43 billion), IT services ($9.4 billion) and software ($6.2 billion). While they represent a smaller proportion of IT spending, IT services and software are expected to attain a faster growth rate than the hardware and telecommunications sectors during the next three years.

According to Gartner, the IT economy in China is driven by large verticals, rather than by consumer IT spending; however, it is slowly evolving toward the consumer market. In 2010, the largest industries (as measured by total external IT spending) are manufacturing, financial services and government. However, Gartner estimates that the fastest-growing industries are healthcare, communications and utilities (based on the compound annual growth rate (CAGR) of their external IT spending).

Demand from Chinese companies for emerging technologies like software-as-a-service (SaaS), virtualization, cloud computing, unified communications and green IT is low but rising. IT vendors should help their channel partners continue to build skill sets around these emerging technologies, as spending on these technologies may help drive IT spending to 2013 and beyond.

Gartner has published an extensive analysis of the IT market outlook for China to 2013. Additional information is available in the report: "Emerging Market Analysis: IT, China, 2010 and Beyond” available at http://www.gartner.com/resId=1339313

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