IDC：China's Digital Transformation Opportunities -- Reassessment of the Chinese Policy and Economic Environment
13 Oct 2016
Beijing, October 13th, 2016 –Information and communications technology (ICT) vendors must reassess their positions and embrace the tremendous business opportunities in China as the country moves to implement its 13th Five-Year Plan.
The 13th Five-Year Plan, and the decisions and policies introduced at the Third Plenary Session of the 18th Central Committee of the Communist Party of China, will serve as the roadmap and action plan for China’s economic development over the next five to ten years.
Based on these two guiding documents and amid a challenging macroeconomic environment, the Chinese government has rolled out a host of policies and initiatives to advance the cause.
All these efforts will bring huge opportunities and become the cornerstone of China’s IT market in coming years, IDC predicts.
IDC encourages ICT vendors to conduct thorough research in the following six areas that we see as the foundation for China's economic development, as the country will make use of the latest ICT technologies to facilitate digital transformation in its respective industries.
1. Accelerating the implementation of 165 major projects in the 13th Five-Year Pan to maintain economic growth
The 165 projects under the 13th Five-Year Plan will promote development in vital areas, and support planning objectives and important tasks, serving as the cornerstone of China's economic growth. Authorities have introduced a slew of measures such as a fast-track approval system to accelerate the implementation of these projects.
IDC estimates that total investment in the 165 projects will exceed RMB 6 trillion (approx. US$ 900 billion), generating over RMB 500 billion (approx. US$ 75 billion) in ICT business opportunities, with RMB 300 billion (approx. US$ 45 billion) alone in the rollout of 5G.
2. Innovation and entrepreneurial initiatives to advance economic restructuring
The primary goals of economic restructuring are to reduce resource consumption, optimize industrial layout, improve the quality of products and services, and alleviate employment pressures. The Chinese government has established the encouragement of innovation and entrepreneurship as one of its top policy initiatives in order to facilitate economic restructuring and spur economic growth. IDC believes that such government-led endeavors will generate immense business opportunities for ICT vendors in the following areas: ICT infrastructure; cloud computing and big data; mergers and acquisitions of startups; and the transition of traditional industries to digital.
3. Policies to improve public wellbeing
In 2015, the State Council launched a policy to promote “Internet+” in order to improve public access to information services. It advocates consumption over the Internet, online and offline interaction, and aims to accelerate the development of Internet-based services for medical, healthcare, pension, education, tourism, and social security. It also encourages the development of innovative governance models and the enhancing of the government’s ability to make data based decisions and management capabilities.
In 2016, the State Council issued a joint initiative to promote Internet+Government services. It also kicked off 80 pilot cities with the One Window One Network plan that introduced interregional sharing of electronic certificates and public service information across government offices.
For ICT vendors, the main business opportunities will be ICT infrastructure, cloud computing and services, big data platforms, smart community, and mobile apps, which are seen as the basis for the digital transformation of government.
4. Intensifying implementation of the Belt and Road Initiative to facilitate globalization
Initially introduced in 2013, the Belt and Road Initiative has achieved significant success – promoting joint development principles, idea framework, and cooperation mechanisms. Belt and Road has connected 18 of China's provinces with nearly 40 countries along its route across Asia and Europe. China's 13th Five-Year Plan elevates the Belt and Road Initiative to one of its major strategies.
IDC sees the main objectives of the Belt and Road Initiative as: exporting China's surplus production; supporting the globalization of Chinese enterprises; engaging in political and economic relations with countries along the route; supporting the internationalization of the Renminbi; and promoting China's soft power and cultural output.
For ICT vendors, the Belt and Road Initiative will give rise to abundant business opportunities as Chinese companies venturing abroad upgrade their IT systems, countries along the route construct their IT infrastructures, and China develops its own big data platforms for the initiative.
5. Expanding Free Trade Zones to enhance openness and transparency
The first Free Trade Zone (FTZ) was established in Shanghai in 2013. In 2014, a second batch of FTZs was established in Tianjin, Guangdong, and Fujian. In 2016, Liaoning, Zhejiang, Henan, Chongqing, Sichuan, and Shanxi provinces were approved to set up FTZs. Currently, 11 FTZs have been established across China. Collectively, they support the Belt and Road Initiative in promoting globalization and the smooth development of China's economy.
The establishment of Free Trade Zones will stimulate the construction and renovation of new regions and districts across China. ICT vendors should focus on developing smart parks, smart transportation, smart logistics, and other smart city projects, in addition to utilizing the cloud platform infrastructure to support the digital transformation of FTZ regions.
6. Adjusting to the national IT development strategy to establish China as an Internet powerhouse
China's national IT development strategy was first introduced in 2006 and has acted as the basis of many of China's IT development policies since then. In 2016, the Chinese government introduced an outline that standardizes and guides the next 10 years of China's IT development, calling for the acceleration of IT development, information-driven modernization, and the establishment of an internet powerhouse.
This outline is very promising for Chinese ICT vendors, but is largely detrimental to the development of multinational corporations in China. The China market will remain very attractive in the future. In order to remain competitive in this market, multinationals will have to radically transform many things, including their domestic business models, strategic investment, technology transfer, equity transfer, and joint investment strategy.
“ICT vendors should capitalize on China's supportive policies and economic environment, making use of ICT technologies and displaying their strengths to discover the opportunities being brought by Digital Transformation.,” said Lianfeng Wu, Vice President and Chief Analyst, IDC China.
The effects of Chinese government policies continue to expand, the implementation of Internet applications continues to deepen, and user needs are becoming increasingly personalized. Chinese enterprises strive to become globalized, and China’s domestic market is overflowing with potential. Openness and transparency will expand, and Digital Transformation will become a mainstream trend in all industries. The latest ICT technologies will revolutionize the user experience, business processes, products and services, and business models. They will drive the transformation, innovation, and growth of industry.
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