Growth in information technology spending on the mainland has slowed more than expected this year, weighed down by the global economic uncertainty that has led to weak demand from businesses and the government.
Forrester Research, an independent market analysis firm based in the United States, cut its growth forecast for mainland enterprise spending on information technology goods and services to about 10 per cent from the 13 per cent estimated in January.
It calculated total technology expenditure by businesses and the government to reach 662 billion yuan (HK$811 billion) this year, up from 605 billion yuan last year.
This weakness, however, is likely to be short-lived. Forrester expects Beijing's economic stimulus efforts to deliver a boost in technology spending next year. Bryan Wang, a vice-president and principal analyst at Forrester, described lower demand from the mainland's public sector as a big reason for lower sales this year in enterprise hardware, software and services.
"Many of the government's stimulus projects concluded at the end of last year," Wang said.
He pointed out that the result was "a slowdown of revenue growth for a good number of the top multinational information-technology companies [operating on the mainland] for the first six months of this year".
Major players affected included International Business Machines, Microsoft, Oracle, Hewlett-Packard and Dell.
Wang said leading local suppliers had also found it difficult this year on the mainland, which is the world's third-largest information technology market behind the US and Japan.
Based on their financial reports for the first half, eight of the mainland's 10 biggest information technology companies recorded either falls in revenue growth or losses on a year-on-year comparison during that period, according to Forrester.
Yonyou Software, a provider of business-management applications formerly known as Ufida Software, posted the steepest dip in revenue growth, down to 17 per cent from 61 per cent last year.
The other suppliers that recorded smaller revenue growth in the first half were Lenovo, ChinaSoft International, ZTE, Huawei Technologies and Inspur.
Two mainland players seemed to bear the brunt of the market slowdown this year, as they incurred losses after posting healthy sales growth last year. These were Kingdee International Software and Beijing Teamsun Technology, with first-half losses of 8 per cent and 3 per cent, respectively.
In a report last week, the Asian Development Bank trimmed its forecast growth for the mainland's GDP to 7.7 per cent this year, down from the 8.5 per cent it projected in April.
Forrester said demand for computer equipment and peripherals on the mainland remained steady this year, despite the economic turbulence. Sales in this enterprise hardware category were forecast to reach 287 billion yuan, a modest increase from 266 billion yuan last year.
Technology upgrades being made by many small and medium-sized businesses had helped drive demand, Wang said.
Source: http://www.scmp.com/business/china-business/article/1056040/mainland-business-tech-spending-slows
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