China poised to leapfrog Japan to rank as No 2 market behind US for information technology goods and services
Spending on business and government expenditure tipped to hit US$224 billion on mainland this year, about 10 per cent more than in neighbouring Japan
Unfazed by a lingering economic slowdown, China is on pace to overtake Japan this year as the world’s second-largest market for information technology goods and services, behind the United States.
Business and government expenditure on technology, including telecommunications services, in mainland China is forecast to reach US$224 billion this year, compared with US$203 billion in Japan, according to new data from Forrester Research.
The US will remain the top global market for tech goods and services as enterprises there are predicted to spend a massive US$1.13 trillion in purchases this year.
In the Asia-Pacific, China would become the region’s biggest enterprise tech market ahead of Japan, Forrester analysts said.
“We believe that 2016 will see organisations in China accelerate their digital transformation initiatives by rapidly increasing their business technology investments,” Charlie Dai, a principal analyst at Forrester, told the South China Morning Post.
Excluding telecommunications services, projected tech spending by organisations on the mainland is expected to total US$147 billion this year, up 8 per cent from an estimated US$136 billion last year.
“We forecast 16 per cent of China’s total tech purchases, or more than US$11 billion, will go to business technology this year - a 25 per cent increase over 2015,” Dai said.
“Those represent a strategic investment in the systems and processes that organisations need to help win, serve and retain their customers.”
It is a trend that has been given a big push by the central government. Premier Li Keqiang early last year unveiled the government’s so-called Internet Plus strategy, which aims to integrate new internet-related technologies into traditional industries to fuel economic growth.
Chinese insurers, for example, are stepping up plans to develop their digital businesses as competition heats up against the country’s “Big Three” internet companies of Alibaba Group, Tencent Holdings and Baidu - known collectively by the acronym BAT.
About 30 per cent of traditional insurance companies on the mainland have raised spending and are sharpening their focus on exploring new digital capabilities, product offerings and customer segments, according to a survey released in December by Accenture.
“Traditional companies are learning from BAT to strategically invest in digital operations and use automation to improve business agility,” Dai said.
Alibaba, the world’s largest e-commerce services provider, also extended its reach into the media sector in 2013 with its stake in Sina Weibo, the Twitter-like Chinese microblogging platform. It agreed in December to buy the Post and all other media assets from the SCMP Group.
Dai said foreign technology suppliers are expected to stay focused on the growing mainland Chinese market, despite state-backed efforts to purchase more from domestic tech vendors.
“We expect foreign tech suppliers will strategically invest in an ecosystem approach, such as partnerships and joint ventures, and work around those policies,” Dai said.
German software giant SAP, for instance, has teamed up with China Telecom to offer so-called cloud computing solutions to small and medium-sized companies in China.
Last month, SAP partnered with computer giant Lenovo Group to sell their combined enterprise software and server hardware to large businesses.
While enterprise spending on computer and communications hardware will still be high on the mainland, Dai said software investments are forecast see a steady increase from this year as e-commerce, cloud computing and so-called big data technologies are rapidly adopted by public and private organisations.
Cloud computing enables companies to buy, sell, lease or distribute online a range of software and other digital resources as an on-demand service, just like electricity from a power grid. These resources are kept and managed inside data centres.
Forrester has forecast the public cloud market in China to reach US$3.8 billion in 2020, up from an estimated US$1.8 billion last year.
Small and medium-sized enterprises, which make up 98 per cent of all businesses in mainland China, are looking to lower their technology investments through cloud services, according to Forrester.