High-tech spending in China seen soaring

BEIJING: An official consulting group estimates that small and mid-size firms

in China will spend a record 100 billion yuan ($12 billion) on high technology

products and services this year, state media said on Monday.

The surge in spending on information technology goods and services by smaller

firms -- which seek to become more efficient amid a rising tide of foreign

competition -- offer huge sales opportunities to foreign firms in China,

analysts say.

Small and mid-size companies spent 82 billion yuan ($9.9 billion) on IT goods

and services last year, making up a third of sales in the sector in China,

according to the regulator Ministry of Information Industry's CCID Consulting

Co, China Daily said.

That would represent an annual growth rate of 23 per cent that is expected to

last until 2005, Huang Yong, vice president of CCID, was quoted as saying.

"Many businesses are very keen to use IT technologies in their management

and operations to sharpen their competitive edge, as they will face more

pressure from foreign rivals after the nation's entry into the World Trade

Organisation," Huang was quoted as saying.

Many enterprises in China still operate without the Internet and other

networks, and the government is pushing more companies to get on-line and to

boost their high technology credentials. Top Chinese PC maker Legend Group Ltd.,

networking equipment giant Cisco Systems Inc and US PC giants Hewlett Packard Co

and IBM had already begun targeting small and mid-size firms, the paper said.

But in 2006, growth in IT spending by small and midsized enterprises, called

SME's, would taper to an estimated 17.9 per cent after a prolonged spurt and

after an expected wave of foreign competition cuts down the total number of

players in China, Huang said.

"Chinese enterprises will have established a modern production

organisation system and will shift their investment focus to some areas in the

supply chain, so the enthusiasm in IT applications will diminish," he was

quoted as saying.

More than 80 per cent of the IT spending last year went to hardware products,

and software and services made up the rest.