China’s domestically dominated IT market has Indian firms rethinking investments
October 4, 2011

Going according to plan, China’s technology companies are developing, employing, researching and executing technology systems for local state owned enterprises.  In what is considered a massive loss of market to Indian technology companies, the Chinese market is domestically dominated. Going forth too, Indian companies don’t seem to have a chance in selling their products to Chinese state owned enterprises.

At a major meeting of SOEs here last week, Communist Party of China (CPC) Politburo member Li Yuanchao called on China’s biggest companies to utilise domestic resources and play a role in introducing ‘high-level’ IT talent, the official Xinhua news agency reported.

Mr. Li heads the CPC’s powerful Organisation Department, which controls the appointment of personnel across the party, government and China’s biggest state-run companies. Mr. Li’s call was also echoed last week by Vice Premier Zhang Dejiang, who identified IT as one of China’s “strategic emerging industries” and stressed the need for China to come up with domestic solutions to its IT demands, instead of looking overseas. Mr. Zhang said the government would boost investment in the IT sector, calling on communication companies to “enhance their abilities to self-innovate.”

Although India, which considers software as one of its main exports and is keen to strike major contracts in the middle kingdom to balance the basket of goods more evenly, hasn’t been able to strike a single deal with a Chinese state owned enterprise yet. Besides TCS’s Bank of China deal in 2007, neither Infosys which recently set up its largest overseas investment in China, nor Wipro have been able to capture a share of the Chinese state owned enterprise market. Leaders including Dr. Manmohan Singh have asked for the Chinese IT market to be opened further to India, however China eager to utilise talent and resources domestically is keen to develop its own IT powerhouse.

Furthermore, over the last few years, many Chinese software engineers have come to India to learn the tricks of the trade, additionally China sends scores of students to India at last count 6,000, especially to Bangalore the software nerve center of India to learn the finer elements of software engineering. Having learnt the right skills over the last few years, Beijing now hopes to put their expertise to good use.

In the first eight months of this year, China’s fixed-asset investment in electronics and IT rose by 67.7 per cent year-on-year — more than double the growth rate at the same time last year — reaching 56 billion yuan (US$8.79 billion), according to the Ministry of Industry and Information Technology (MIIT).

China’s IT industry has grown 30.5 per cent year-on-year in the first eight months of this year, largely on the back of increased demand from the domestic SOE industry. The industry’s revenue reached 1.112 trillion yuan (US$174.6 billion). Exports reached US$18 billion.

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