China’s State Council has announced plans to develop the country’s consumption-related information technology (IT) products and further unleash the potential of domestic demand.
The scale of IT consumption is expected to expand to 6 trillion yuan ($901 billion) by 2020, an average annual growth of over 11%, and the growth of the sector will drive the output of 1.5 trillion yuan from related industries, according to the latest statement published on the State Council’s website.
‘The latest guideline shows world's leading economies, including China, see the importance of staying ahead of technology innovation as the nation’s tech output is expected to reach 1.5 trillion yuan by 2020 in all kind of related industries,’ Alexandre Mouthon, senior client portfolio manager, pictet-digital at Pictet Asset Management (Pictet AM) told Citywire Asia in an e-mail reply. ‘This is confirming our view that the digital migration is today speeding up and is touching every single industry.’
Sundeep Gantori, UBS Wealth Management’s global technology analyst said that the development of technology is the driving force behind the scene for almost each sector.
‘The Chinese government has been thinking how this tech development can drive revolution in the consumer space, such as e-commerce, smartphones or sharing economy. So [now] the government thinks that they may embrace technology within the traditional or “old economy” companies,’ Gantori said in a phone interview.
The development of IT is expected to drive other industries' growth, including finance, education, gaming, healthcare, manufacturing, automotive, retail and security, according to Pictet AM’s Mouthon.
The Chinese government is now starting to encourage enterprise IT, as it is currently mainly driven by the western economies, such as the US, UK and to some extent, the Europe.
‘China’s penetration rates in enterprise IT is still limited, however, the policy is clearly leaning towards increase in digitalisation not just on consumer IT, but also on enterprise IT, meaning software automation, cyber security, or investment-related data centres etc,’ said UBS WM’s Gantori.
China’s consumer IT is hugely influenced by the country's internet triumvirate of Tencent, Baidu and Alibaba and they have built a global social media platform. The country has the largest internet population compared to other countries, approximately 700 million, and a comprehensive e-payment system to drive internet spending, according to Claudia W.H. Ching, portfolio manager at EFG Asset Management.
She said that the top three players have now moved to ‘increase their R&D expenses in promoting artificial intelligence (AI) and automation’.
Colin Liang, portfolio manager at NN Investment Partners said that this is an ‘on-going’ evolvement of China’s tech sector, following the State Council’s recent release of its AI guideline in late July.