The following is a translation of an article from www.cfen.com.cn by our China correspondent, Andrew van Buren:
FROM A WIDE array of viewpoints – vendors, manufacturers and industry watchers – most would agree that the first half was a very grim one for China’s self-proclaimed Silicon Valley, The Zhongguancun IT zone in Beijing.
The whole sector, of which the zone is a bellwether, fell as a whole in the first six months. Retailers and manufacturers lamented that in the January-June period, major bulk buyers of IT products exercised self-discipline in the gloomy environment, and didn’t jump on new technology purchases as was the norm before the downturn arrived last year.
Nearly to a tee, retailers in the zone therefore both hope – and believe – that the first half was the nadir, the worst in recent memory, and most used the slowdown to reconfigure and revitalize their operations, business models and product lines.
In June, the closely watched Zhongguancun IT Products Market Index plummeted to just 89.81 points, the lowest level since the economic crisis took on global proportions in August of last year. At this trough, many industry experts see little room for further downside, so it is only logical that the second half will see a sector rejuvenation.
And of course it, like all domestic industries, will get a boost from the economic stimulus and the still robust business activity in China.
Firstly, we must acknowledge that things in China’s IT sector generally pick up each July and August – the peak summer consumption season. And on the first day of the fourth quarter – October 1 – China will celebrate a very special National Day holiday, namely, the 60th anniversary of the PRC’s founding.
Although there is no “Golden Week” in the summer, the July-August shopping spurt, followed by this year’s especially festive National Day 7-day Golden Week holiday, quite a bit of positive sentiment will be ringing in the fourth quarter, and it is unlikely the all-important Zhongguancun IT Products Market Index will re-venture into sub-100 point territory by that time.
And lest we forget, the 4.5 trln yuan economic stimulus package -- much of it targeting a newfound focus on spurring domestic demand amid anemic export performance – will certainly help Chinese industry, IT included. Already, the economy is showing signs of recovery, with the GDP up 7.1% in the first half, and rising 7.9% in June alone. This makes the magical 8% official full-year GDP growth target all the more possible.
Add to that the fact that urban and rural incomes are up some 11.2% and 8.1%, respectively, in the first half and we are looking at more money potentially ogling anew new IT products. This should help boost domestic demand as China moves away from traditional and dangerous over-reliance on IT exports for growth. Therefore, the second half will certainly be a brighter one for China’s IT sector overall.
Finally, the Zone is well into its restructuring and revitalization campaign, which will boost consumer confidence in Chinese IT quality, dependability and value. This will likely boost the market to the end of the year as well.
