Online penetration in China currently stands at 19.1 per cent meaning there is room for plenty of growth as it aims to close the gap with Europe and the US. However, while total revenues of just $5.9 billion for all of China's Internet companies in 2007 may seem low to potential investors, it's worth noting that online advertising revenues alone in the US totalled around four times that amount, something that should prove very attractive to those firms thinking of entering the market.
Even more compelling is the prediction of research firm BDA China which estimates that its online population will continue to grow by 18 per cent annually, reaching around 490 million in 2012. Figures like these are hard to ignore and provide a very real basis for investment.
Today, some 200 million people in the country use broadband, with just under 50 million of these being subscribers. Beijing, Shanghai, Guangdong, Zhejiang and Jiangsu all have good infrastructure to support this, with many using DSL from China Telecom and China Netcom at price points well within the range of the middle-class. This probably accounts for the two billion hours spent online every week by those in the country.
Big sales potential
According to Jacky Huang, senior research analyst for Vertical Industry Research and Consulting at IDC China, communities have begun to fuel the growth of the consumer ecommerce market.
"China's online business-to-consumer (B2C) spending has reached US$30 billion and the main segments include online shopping, online travel, elearning, online gaming, and online security," he said.
Huang believes that the $126.3 billion spent in 2006 is further proof that the business-to-business (B2B) market in China has moved into a high development stage. In May, an Intellect report into the state of the UK technology industry showed that the European technology industry grew by just 5.7 per cent last year in comparison to the 28 per cent growth enjoyed by the Chinese.
First quarter figures released by the Ministry of Industry and Information showed software services had generated $4 billion, software outsourcing 258 million and software sales $7 billion. By 2010, its software product and services sectors are forecast to reach $140 billion, fuelling further expectation of a bullish market anchored by home-grown talent.
Academic drivers
Some of this will come from the country's intense technology transfer programme, which includes developing a number of university related parks.
According to Dr Malcolm Parry, director of the Surrey Research Park, who also works with the British council and UNESCO on promoting innovation and enterprise, these have been planned through a top-down policy driven initiative.
