Macro moves' impact on IT sector limited
By Liu Baijia (China Daily)
Updated: 2004-07-02 09:00

Macroeconomic control in China to curb overheating of some economic sectors will not have much impact on the information technology (IT) industry, say leading research houses and business executives.

Ken Xie, general manager of the Chinese operation of the US-based information technology (IT) industry research house International Data Corp (IDC), says he believes that the Chinese Government's efforts to curb the fast development of real estate, steel, electrolytic aluminium, concrete, and other sectors and the tightening of financing to these areas won't have significant impacts on the IT industry.

"Our observation is that the negative and positive effects will negate each other," said the IDC (China) chief analyst.

He said the IDC would maintain its forecast about the growth of China's IT market.

IDC said in April that the industry would grow at a robust average annual rate of 15 per cent from this year's US$25 billion to US$50.8 billion in 2008.

Dion Wiggins, research director of another US-headquartered research firm Gartner's Asia-Pacific operation, also believed the macro control measures won't create a big difference for the IT industry and Gartner will not change its prediction of 7.5 per cent growth of the enterprise IT spending market this year.

Both analysts agreed that the Chinese Government's measures will have some significant influences on manufacturing companies. They also said that because the small portion of IT spending by the manufacturing industry, especially in heavily affected sectors, even if their spending on IT systems reduced, it wouldn't make much difference to the growth of total IT spending.

According to IDC, manufacturing only accounted for 8.5 per cent of the total IT expenditure in China last year.

Xie said some enterprises might postpone their spending on IT systems, but it won't cause a big drop in the growth of the market and purchase demands would be released later.

They also believed that macro-economic control might even enhance enterprises' awareness of the importance of the IT systems, which becomes another way to raise their efficiency and competitiveness, instead of simply expanding the scale of businesses.

On the side of IT manufacturers, IDC and Gartner also forecast that price hikes of materials such as steel and aluminium wouldn't add too much burden to IT manufacturers, as these materials account only for a small part of the costs of devices like computers and mobile phones.

Dai Maoyu, executive deputy general manager of Ningbo Bird, the biggest domestic mobile phone maker, agreed with the IDC and Gartner and said the moves of the Chinese Government did not and will not cause many difficulties to the mobile phone manufacturing sector.

He believed the fierce competition in the market was the biggest factor for his company's growth rather than macroeconomic controls.

Bird, which planned to sell 18 million handsets this year from the 12 million units of 2003, may not meet that target.

Dai said the domestic sales of his company will maintain the same 12-million level this year, but exports would achieve a dramatic increase to 2 million this year.

"The only difference is that our distributors usually paid a lot of money in advance to get our phones, but this year they have cut the volumes of orders, since many of them have difficulties in getting loans from banks," said Dai.

Wiggins with Gartner said this was actually good for the industry, as companies were usually heavily dependent on bank loans in their operations.

"Too much reliance on bank loans is abnormal for business operations, so the tightening of loans will be helpful to make businesses focus more on their own competitiveness," he said.

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