Belt and Road, customer experience, IoT: Why China’s 8% tech market growth in 2018 isn’t just about tech companies (TechNode)

China’s tech sector saw huge developments in 2017, and spending on tech here is predicted to grow 8% in 2018. Here we look at some of the reasons why and how: expect to see continued overseas development in part due to the government’s Belt and Road Initiative; customer service will become critical as changing customer life-cycles in digital businesses show signs of maturity; ecosystems will reign supreme, and even currency shifts will have an impact. Meanwhile, companies will have to find a balance between resource allocation and talent acquisition.

According to Forrester’s “China Tech Market Outlook, 2018-2019”, China’s technology spending could reach $234 billion in 2018, up 8%. Much of this is due to the pursuit of reform in China and strong growth in software, consulting and outsourcing. We looked at various predictions and spoke to Forrester’s analyst Charlie Dai about factors affecting China’s increasingly global tech industry.

Belt and Road

Perhaps we should have been paying more attention to the impact the government’s Belt and Road Initiative (B&RI)—the project that aims to re-energize China’s ancient trading paths—is having on tech. We have already covered how it may help the export of Chinese tech firms’ business models and sharing economy. The report shows, however, that from a more macro perspective, changes attributed to this project are impacting tech much more: China’s tech market growth isn’t just about its tech companies.

Beijing’s financial policies have reduced the speed of the renminbi’s devaluation, reducing costs across the supply chain. The B&RI has, according to the report, made substantial progress in terms of “helping China turn the excess capacity of its traditional industries into business growth.” In October 2017, the World Bank increased its forecast for China’s economic growth from 6.5% to 6.7%. These macro-level changes, combined with increasing competition at home, mean a wide range of industries are looking to tech-up. Their use of new technologies to improve their efficiency is part of a push for what Charlie Dai calls their “digital transformation.”

China tech spending

How tech spending is forecast to grow in China. ((Photo: Forrester, TechNode)

“As a critical national strategy, B&RI will effectively help China turn excess capacity of traditional industries into business growth,” Dai told TechNode. “Along this journey, technologies like cloud, e-commerce, AI and IoT will play a critical role to accelerate digital transformation and build up digital ecosystem of enterprises, organizations, and governments across continents.”

This will translate into stable hardware sales, but also growth in consulting services, software and outsourcing.

Tech as an enabler at home and abroad

China’s tech companies will continue to fuel growth for other areas of China’s economy as they pursue international expansion plans.

According to Forrester’s data, emerging technologies will be the building blocks of digital businesses through their reform and digital transformation. 66% of business decision-makers in China are planning to improve their use of data and analytics; 62% will increase their use of cloud services; 59% will use IoT to develop smart products or connected assets; 58% will invest in AI and other cognitive technologies.

Dai told TechNode: “Overseas expansion will provide great opportunities for Chinese tech companies to drive business growth and gain strategic advantages for long-term evolution. However, it will also challenge the strategic planning and operations capabilities of executive teams to strike the right balance in talent acquisition and resource allocation.”

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Frank Hersey

2 March 2018

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