IT Strengths and Weaknesses

Overview

According to “IMD World Competitiveness Yearbook 2002”, China’s technology competitiveness is ranked 25 among 49 countries and regions.

Generally, information technology sector in China is competitive, however, the influence of information technology to the public remains low.

Strengths

Government Policies 

The most significant strength of IT in China is its full support from Chinese government. Chinese government has stressed the importance of develop IT sector to the whole economic development of the country, with considerable commitments to massive investments in infrastructure positive effects of IT on its economic development. The central government has enacted a national wide policy to attract foreign investment. The local governments also have created flexible and elastic investor policies. 

The success of China's IT firms and their prospects for future growth are closely linked to measures taken by government. China maintains a number of preferential policies for high-tech investments, including tax holidays and refunds. 

High Market Demand

Currently, China's population is above 1.2 billion and it is estimated that it will grow at a rate of 17 million annually. The potential customer base means huge demand. To keep up with this momentum and customer demands, the IT industry will be treated as a priority sector by the government with preferential policy and heavy investment.

Low cost Labor

One of the attractions to the foreign investors is low cost, but qualified labor force in China. This is also the truth in IT industry. But one challenge facing Chinese IT industry is how to attract and retain the IT workforce. More and more IT labors went abroad for better opportunity and higher salary. It causes the serious brain drain to Chinese IT industry.

Weaknesses

Financial Systems 

The major problems in China IT finance are the low speed on-line payments, less mature venture capital financing system and inefficient stock markets. 

The practice of venture capital financing in China is still in its infant stage, although China’s huge technology and market potentials have been attracting much attention from Chinese governments and private sectors, and foreign venture capital communities. 

In China, the electronic payment generally takes three days to a week. China also does not have well-developed credits systems. 

The biggest issue of China's stock market is lack of transparency. Reporting requirements for listed company is not as compete and rigorous as the stock market in more developed countries (McGill, 2000).

Intellectual Property 

Protection Intellectual property protection is a major source of contention between China and foreign partners/competitors in IT sector. According to Privacy International, China piracy on video, CD, and software is widespread. In 2000, the piracy rate is 94%, a total of $1,124 million in losses to the copyright owners. Since then, China has taken considerable efforts to update its IP legal system and strengthen its legal enforcement, such as, steamrollers crushing counterfeit CDs collected on police raids. There is also a growing awareness in China of IP legal protections. Education in IP related laws also expended dramatically.

Deregulation

Although China introduced officially competition in the telecommunication several years ago, deregulation in large is incomplete, which obstruct the IT sector from developing.

E-Commerce

The Payment network-Online consumers in China often browse through a sales website only to find they must pay by mail or walk down the block to provide payment in person. This makes e-commerce more time-consuming, more costly, and less predictable than a traditional purchase. And it is a sure way to kill the prospects for internet business.

Telecom hurdles- Telecom costs remain an impediment to the development of e-commerce in China. 71% of the users interviewed cited cost and speed as the key hurdles to extend and more frequent online activity.  

Outmoded shopping concepts and methods-Chinese customers shop by looking at, touching, listening to and tasting products. In general, they feel it is indirect and unsafe to shop on line.