China's information technology (IT) market has shrugged off slow growth and a drop in the hardware market happening last year and come back to the fast lane again, said the US-based market researcher International Data Corp (IDC) Thursday.

"Various signs show the restructuring is over and the market will enter a new round of fast and steady growth," said Ken Xie, general manager of IDC China.

He said at his company's annual market review and forecast event, IDC Directions 2004, that despite the negative impacts of the SARS (severe acute respiratory syndrome) outbreak in the first half of last year, the country's IT market grew by 11 percent year-on-year to US$25.1 billion, compared with a 2.1 percent growth rate in 2002.

The IT hardware market, which suffered from an unprecedented drop in 2002, rebounded to a healthy 8 percent growth last year.

Software and IT services even grew faster than the hardware segment, with 24 percent and 20.6 percent rates respectively in 2003.

Xie predicted the IT market in China will grow at an annual average of 15.6 percent from 2003 to 2008 and reach US$51.74 billion by then.

Its proportion of the total Asia-Pacific region, not including Japan, will also rise from 2003's 30.8 percent to 38 percent in 2008.

Xie pointed out that besides China's strong economic growth, the government's push to build an information society, the continuous inflow of foreign direct investment, less obstacles and greater potential in small- and medium-sized cities and rural areas as well as the small- and medium-sized business sector will all drive steady growth in the next five years.

Since 2000, the burst of the Internet bubble, overheated hardware investment and the overcapacity of telecom networks suppressed market demands.

"Overcapacity has been consumed and it is more important to look at new growth areas, rather than simply tightening spending," Xie said at a corporate conference.

Small- and medium-sized cities will also play an increasingly important role for the growth of the market.

According to IDC, IT spending in small- and medium-sized cities hit 27.4 percent of the country's total, but will grow to 40 percent in 2008.

The importance of the small- and medium-sized business market will also rise steadily, as about 50 percent of total IT spending will be made in the sector in 2008, compared with last year's 28 percent.

Xie predicted that due to China's emphasis on e-government, the state may become the biggest IT spender in the coming years, although it was only the third after finance and consumer sectors last year.

IT consulting will be one of the fastest growing businesses in the next five years, as customers will pay more attention to IT solutions, instead of only buying hardware and software products, according to Xie.

IDC predicted business will grow by an annual average of 46.7 percent in the 2004-08 period and the demand will mainly come from government, manufacturing, finance, telecom and energy sectors.

Corresponding to the robust demand for IT consulting, outsourcing will become another prosperous business.

According to the US research company, outsourcing will be accepted by more and more domestic companies and organizations and is expected to increase by 51 percent every year on average in the next five years.

Notebook computers will make more contributions to the hardware market.

IDC statistics show shipments of notebook computers grew by almost 80 percent last year to 1.75 million units, but it will reach 2.62 million this year, which will double to 5.38 million units in 2008.

Network security is also forecast to see almost four times its regular growth in the next five years, from US$200 million to almost US$800 million in 2008.

(China Daily March 26, 2004)