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January 27, 2010

Economic stimulus policies to drive IT spending in china, says Gartner

Expects stimulus-driven IT spending to peak in 2010

By CBR Staff Writer

Economic stimulus policies will drive IT spending in China to $38.9bn through 2013, offering an opportunity for IT providers, according to IT research and advisory firm Gartner.

The firm said that the multiple stimulus policies issued by China’s central government when the worldwide economic crisis hit China’s export trade will continue to drive the purchase and consumption of IT products and services.

Oliver Xu, principal research analyst at Gartner, said: The Chinese government is seeking to counter the decline in its export trade by encouraging domestic demand, and it appears that it is succeeding. We predict that stimulus-driven IT spending will reach its highest level in 2010, primarily because most stimulus policy measures and plans were finalised and executed in mid-2009.

The main stimulus policies issued by the Chinese government included a $583.9bn package to address infrastructure and public facilities/organisations; ten industries revitalisation plan aimed at helping enterprises in particular industrial segments; and various smaller subsidy programs and tax reductions for consumers, according to Gartner.

Mr Xu said that the most visible stimulus-related IT spending will occur within the transportation services and equipment, healthcare, and construction verticals, which are highly dependent on IT and invest in it aggressively.

Gartner expects stimulus policies to drive IT spending in telecom to reach $4.5bn in 2010 and will surpass $14.2bn for the period from 2009 through 2013. Hardware is expected to be the second largest segment with spending from stimulus policies to reach $4.1bn in 2010, and total $13bn from 2009 through 2013.

The research firm said that Vendors target the highest level of contacts in companies that benefit from stimulus policies, as enterprises that have benefited from the stimulus policies are state-owned central and local companies and organisations that make centralised IT purchases. Overseas-based IT vendors target the product and service areas in which local competitors cannot perform well.

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Mr Xu added: Hardware, software and IT services providers should track government policies to see how they affect purchasing decisions and adjust their go-to-market strategies accordingly, as the Chinese government will likely change its policies as the global economic downturn progresses.

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