Liberalization & Deregulation

Internet Diffusion

Electronic Commerce

Hardware Manufacturing

Software Development 

Who uses IT?

IT Labor Market

IT Geographics

IT Financing

Government Policies

Legal Environment

Transborder Data Flows 

Analysis: IT Strengths & Weakness

Analysis: Impacts on the Business

Sources and Links

China's software market has been growing steadily. It is expected to reach $600 million this year, up over 40% from the previous year, according to Dataquest. China's software industry is the most rapidly growing industry in the country with an annual growth rate of over 30 percent. China's software industry and the market have witnessed skyrocketing growth since the beginning of the 1990s. In addition, the industry's average annual growth rate has exceeded 20 percent in recent years 16. 

The software industry, with 150,000 employees, sold 17.6 billion yuan (US$2.1 billion) of products in 1999. China will invest more in the software industry, encourage venture capital, cut taxation on software, and create more channels for software businesses to raise funds. China will try to cultivate several powerful software bases as well as a group of big software companies with an annual output value of over 1 billion yuan (US$120 million) each in five to 10 years. China expects the export volume of software to increase to US$1 billion by then from the current US$130 million. 

There are over 3,000 software companies in China. Over 90% are domestic firms and most of them are small operations. In addition, there are numerous universities and research institutions in major cities, particularly in Beijing. They provide the software industry with an abundant supply of technical experts. 

Distribution and trend of the software market

The software industry is located largely on the following areas: Beijing, Shanghai, Shenyang, and Shenzhen. Development is also spreading from several special economic zones or special "electronic streets" (or high tech streets) to almost all cities in China, and also to overseas activities. This is indeed one of the fastest growing industries in the country. China is heading for modernization of the information industry. 

Software technologies

In the area of Chinese information processing, China has established its standard for processing Chinese characters, successfully developed various input and output technologies for Chinese characters, and localized some major system software and supporting software for various types of machines, also, has developed leading Chinese electronic publishing systems. 

Research on new software technologies has reached a reasonable level in areas such as machine translation, Chinese character recognition, voice composition, and development tools for expert systems. There is also work in other areas such automatic code generation, distributed processing system, and parallel processing, and pattern recognition. 

Software companies and their managerial structures

There are a few forms of software companies in China: 

1. The Chinese Software Corporation started as a state owned enterprise, and it now has become a company owned by shareholders. This company has been steadily growing, and has a strong work force. 
2. Users' Friend Accounting Software Co. is basically a private company. The management structure is very flexible, and it has become a highly successful company in building accounting systems. 
3. The Fangzheng (Founder) Group of Beijing University, the Northeastern University--Alpine Inc., Xing-Xing Co. of Shenzhen, are enterprises supported by universities. The key to success for these companies is that they have technologies and they know how to do business. 

1. Beijing, Shanghai, and Shenzhen are the bases of Chinese software industries. Most of the above mentioned Companies locate in Beijing. Shenyang (in Northeastern China) is catching up because of Northeastern University. 
2. The Chinese software industries are guided by the important needs in the nation's economic development, and some major projects are in computerization of finance, EDI, economic information management systems. There are several seemingly good emerging companies in specific application areas. Information services are taking early shape in China. 
3. Most software companies only have local customers. They develop products, and moreover provide service according to local users' demands. 
4. There is still a lack of high-level software engineers. Most people are programmers; very few people are program analysts, and system designers. Thus, professionals with system integration skills, especially for large-scale integration, are not widely available. It is likely that individuals with these skills will eventually be trained locally, but for the present, much of the expertise needs to come from abroad, including Hong Kong and other Chinese speaking centers. 
5. The enforcement of copyright law still has a way to take full effect. This will have some side effects for the Chinese software industries. 

China's future entry into the World Trade Organization (WTO) would lead to the overwhelming entry of foreign software products without any barrier. China will further regulate its software market, make full use of the international resources, and strengthen international exchanges and cooperation to meet the challenge. 

China is forecast to become the largest information technology (IT) market in the Asia-Pacific region (excluding Japan) by 2001. It is expected that China will represent one-third of the total IT market in the region excluding Japan by 2003. However, there are problems with the industry, primary of which are piracy and illegal copying and distribution of software. But despite this foreign in investment into the country is growing as well as local start-ups and more recently venture capital funds targeting the software market. Much of this development has been due to the rapidly growing force of the Internet in China and also the growing need for small and medium sized enterprises to use software for everyday business functions. Rounding of the market is the growing desire of ordinary consumers for software products (games) for teenagers, learning aids for children. 

Local software talent is emerging from the universities and new high-technology clusters, often attached to the colleges. The government appears keen to promote the industry and WTO entry will also provide a lift. All in all China is a market that is blossoming and should become a major force both in purchasing and development in the twenty-first century. 

China's software development market will continue to expand rapidly as it has done so over the past five years. Several high-tech R&D parks have been set up in Shanghai and Shenzhen that will spearhead China's software production efforts. Oracle and Microsoft are two major foreign players in China's software market who have teamed up with Chinese partners to sell their products. 

Resource: Overview of Chinese Software Industry Software Market in China 17