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Slowing investment and exports dampen IT growth

By Hao Zhou (chinadaily.com.cn)
Updated: 2008-10-17 14:05

The growth rate of China's IT industry slowed in the first three quarters, while full-year growth is estimated at around 20 percent, according to a report released by the Ministry of Industry and Information Technology.

But despite the overall slowdown, some IT sectors such as software are still gaining ground.

With the fall in exports and investments, the IT industry grew more slowly than the national average, continuing with the momentum of the last several quarters.

Between January and September, the combined core business revenues of major IT companies reached a total of 4.1 trillion yuan ($600.3 billion), up 20.5 percent year-on-year. The full-year's total sales are estimated at 6.7 trillion yuan, according to Gao Sumei, a monitor of the industry operation monitoring agency with the Ministry.

During the same period, the IT industry's added value increased 21.9 percent from the year before, and the pre-tax profits surged 23 percent.

Although the exports of IT products, especially communication terminals, PCs and home video and audio appliances, were down, the overall industrial structure continued to be optimized. High-definition technology, high value-added and basic electronic products such as flat-screen displays, software and services maintained a growth rate above 30 percent.

The software industry, for instance, saw its revenue soar 34.4 percent, some 9.5 percentage points higher compared with the first nine months of last year. Meanwhile, the outsourcing services in the software industry even surged 47.3 percent year-on-year.

However, there are still some factors to dampen the outlook in the IT industry in future. Firstly, the slowing down global economy and shrinking international trade will drag down China's IT industry, which relies heavily on foreign investments and exports.

Secondly, skyrocketing raw material prices and the implementation of the new labor law have significantly increased production costs for IT processing companies. Together with the appreciating yuan, Chinese IT companies face difficulty in making profits.

Thirdly, Chinese domestic IT firms are losing market shares because of their incompetence in core technologies, which is also a major task in further structural adjustments in China's IT industry.